Time to act is now

In making selections from employer's benefits menu, consider medical needs, activities, and sign up at 1st chance

Your Money

September 23, 2007|By Tami Luhby | Tami Luhby,NEWSDAY

If you think starting a new job is challenging, wait until it is time to sign up for benefits.

In the old days, new employees typically would receive a thick binder filled with information, booklets and forms about health insurance, retirement plans and other benefits. Frequently, a human resources specialist would sit with the new hire to explain the options.

Nowadays, workers typically must glean the information about the company's offerings from countless Web pages.

As onerous as it might seem, it's crucial that workers review the documents and take advantage of the programs an employer sponsors as soon as they are eligible, experts said.

Some companies allow people to sign up right away, although others make them wait up to a year.

"When you are getting benefits paid for by your employer, that's cash in your pocket," said Tracy Baker, a certified financial planner in Fairfax, Va., and co-author of Navigating Your Health Benefits for Dummies.

"It's the same as a bonus," Baker said.

Some considerations to signing up for benefits:

Health

One of the most important benefits on the job is health insurance. It can also be among the most complicated if an employer offers multiple plans.

Many employers give workers a choice of a health maintenance organization, a preferred provider organization or a point-of-service plan. They usually differ in terms of premiums and out-of-pocket costs, such as the deductible and co-payments.

Some plans allow employees to see any doctor, some require a referral before seeing anyone other than a primary-care doctor, and others won't pay for any out-of-network services.

Before signing up, workers should evaluate how they have used medical services in the past, Baker said. Are you on any medications? Do you visit any doctors regularly? Do you engage in activities, such as sports, that may lead to needing a doctor's care?

Then see what plans are offered. Plans with lower premiums often carry higher co-pays and deductibles - but this may be OK if an employee rarely steps into a doctor's office.

Don't get too hung up on the name HMO or PPO, said Susan Pisano, a spokeswoman for America's Health Insurance Plans, a trade association. Instead, see whether the plans' terms fit with your needs.

For instance, employees should steer clear of a plan that includes services - such as gym reimbursement - that they won't use.

Some employers are instituting high-deductible health plans, which may be appealing to young people who often use few medical services. With these plans, workers pay for much of their medical costs out-of-pocket, but have coverage with low monthly premiums.

The plans often are coupled with a health savings account, which allows workers to sock away pretax dollars for medical care.

Retirement

Retirement may be decades off, but the sooner workers start saving, the better off they'll be. Sign up for that 401(k) now and put in as much as you can afford, experts said.

Many workers put off joining the 401(k), saying they don't have the money or they won't be at the company long enough to make it worthwhile, said Bill Arnone, employee financial services practice leader at Ernst & Young in New York.

That's a big mistake, he said. Workers in their early 20s, for example, can have 40 years for their retirement nest egg to grow on a compound basis, meaning they stand to earn money on their earnings.

At the very least, put in enough money to qualify for the maximum the company will match. Employers often will add funds to their workers' accounts based on the employees' contributions.

For Astoria, N.Y., resident Meghan Attreed, the company match was a big selling point. A 2006 Hofstra University graduate, she puts 3 percent into her 401(k) at Articulate Communications, a New York public relations firm. That amount is matched dollar for dollar by her employer.

"It would be leaving money on the table if I didn't contribute," Attreed said. "I don't even factor it into my monthly budget. I never even see it."

Attreed puts half her contribution into a traditional 401(k), which is funded with pretax dollars, and half in a Roth 401(k), which offers no upfront tax benefits. She did this so she'll have a mix of taxable and tax-free savings when she retires. Withdrawals at retirement from a traditional 401(k) are subject to income tax, but Roth 401(k) distributions typically are not.

Not everyone, however, should sign up for a 401(k), experts said.

People with hefty credit-card bills carrying a high interest rate might want to use the money - or at least some of it - to pay down debts. Other people, such as Lawrence Bond of Farmingdale, N.Y., know that saving for the future is important, but other goals are more immediate. Bond, who received a master's degree from Long Island University in May, is saving money for a house.

"I'm trying to save for the next five years, not the next 40," said Bond, who works as a college admissions counselor.

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