The Total Package: Evaluating Employee Benefits

Chances are your salary will be your biggest concern when you’re choosing among jobs or negotiating a compensation package with your new employer. After all, regular income is the most basic priority. If you don’t have enough to pay for essentials like rent, food, and clothing, benefits like a retirement savings plan and even health insurance might seem unimportant. But it pays to consider a wide variety of benefits.

While most employers offer full-time employees a package of benefits, some are more comprehensive than others. When you’re looking at jobs, make sure you weigh the different benefits, and make the best overall package, not just the highest salary, your ultimate priority. That way you can be sure you’ve got all your bases covered—for the present as well as the future.

Insurance

Health insurance is by far the most common job benefit, as well as the most popular. And with good reason: Even if you have to pay part of the cost out of every paycheck, the protection that health insurance provides is more than worth the cost—even if you need it only occasionally.

Even if you’re usually healthy and you use health insurance just for regular checkups, it’s still better to have it than not. Without insurance, it would take just one serious injury or emergency operation to put a huge hole in your financial security.

Retirement Plans

Retirement plans are another popular benefit, and one you should make a priority when you’re evaluating different employers. Retirement might seem a long way off when you’re just getting started, but if you can’t plan on a source of income after you stop working, retirement may be a lot further away—or less enjoyable—than you’d like it to be.

Employer sponsored retirement plans, whether funded entirely by your employer, by you alone, or by you and your employer together, offer an easy and effective way to start preparing for the future.

make your own benefits: Cafeteria Plans

Some employers let you have a hand in designing your own benefits package by offering cafeteria plans, more formally known as flexible spending plans. These plans may include several core benefits, such as health insurance or a retirement savings plan.

But they also let you set aside pretax income, which you can allocate among the plan options your employer offers to pay for certain expenses. For example, you could put money into a cafeteria plan to cover extra life insurance, uninsured medical expenses, such as prescription glasses or contacts, or childcare if you need it. As the bills for those expenses come due, you can use the money you’ve put into the plan to pay for them.

Cafeteria plans can be a great opportunity to tailor your benefits package to your needs. And since the amounts you put aside reduce your taxable income, you actually end up with more money in your pocket than if you didn’t participate. The catch is that you have to spend the full amount you allocate on eligible expenses before the end of the year or sometimes up to three months beyond. If you don’t spend it, you can’t get it back.

If you set aside $1,500 for medical expenses but you only spend $1,000, you could lose the other $500. One solution is to buy an extra pair of glasses or speed up some optional dental work.

Debt Repayment

Increasingly employers, recognizing the financial stress that employees may suffer if they have large student loan debt, offer repayment programs as an optional benefit.

The CARES Act of 2020 allows employers to deduct an annual $5,250 contribution toward repaying student debt to individual employees through 2025, tax-free to the employees. The repayment may be made directly to the loan servicer or to the employee. Employers may impose various restrictions on participating employees, or set a limit on the total amount they’ll provide each employee.

Another approach may be making matching contributions to a retirement savings plan based on the amount an employee uses to repay student loans.

If you’re concerned about your loan debt, you might want to ask if your employer offers one of these alternatives.