Can You Actually Lose Money On Your Employee Benefits?

Look for ways to mitigate a potential monetary loss within your employee benefits plan.


Wait, can you really lose money on your employee benefits plan? The answer is, Yes! Many people are now actually losing money because of the overwhelming nature of selecting employee benefits, such as healthcare and health savings accounts.

In fact, I’ve encountered several diverse situations in the past month alone that highlight this very issue that include:

●    Reduced premiums, same coverage

●    Flexible spending accounts both health and dependents

●    Matching contributions, non-discretionary monies

●    Health Savings Accounts (HSA)

●    Disability insurance

●    Life insurance

●    Comparing across spouses, company philosophies

Don\’t let unfamiliar terminology fool you into making poor choices upon choosing your employee benefits

As I was going over employee benefits with a recently married person, she heard the phrase “high deductible” and immediately rejected it. She questioned, “Why would I want to pay a high deductible?” The true cost difference between a high deductible health care plan and a non-high deductible health care plan is often not that big.

I quickly explained that a high deductible health care plan (in her case let\’s say there was a $1600 deductible per person) will offer significant premium savings! If there was ever an issue with paying the deductible, she could set aside that money in a health savings account (which is saved tax free) to take care of that expense.  

Now that she is married, as a couple, she and her husband can contribute $7300 into a tax-free health savings account in 2022. In some of my previous Forbes articles, I highlighted (in a three-part series in June, 2019), why a health savings account is so awesome. Think of it as a “medical Roth individual retirement account,” with the benefit of tax-free compounding.

Not having to pay taxes on a health savings contribution account is only the beginning! You can get tax-free compounding and as long as you use it for healthcare expenses. You don\’t pay taxes when you use it. This, to me, is one of the best secret weapons when it comes to savings accounts. While many do not like the fact that it is limited to health care expenses, as you age, typically. your largest expense becomes healthcare.

Another one of my clients was enrolled in a high deductible health care plan by her new employer. In this case, the employer was paying 90% of the premium and making a full $3650 contribution to this person\’s health savings account – which is the maximum for a single person. This saved on the monthly premium cost as compared to her prior employer. It also and provided a method to pay the deductible in case it did kick in.

A health savings account can really work to your advantage within your employee benefits!

I advised this client to pay out-of-pocket with the new savings and let the health savings account compound over time. As explained in the prior example. This individual bemoaned the fact that her new employer was not giving her a matching contribution in the 401(k). I said, “You\’ve got something even better. They are giving you a non-discretionary match or free money that’s 5% of your salary. You do not have to put in your own money just to get the company\’s money—-which is the case in many 401(k) plans. If you want to make a contribution, you can, but you don\’t have to because of these two things!” By the way, having access to a 401(k) allows her to say $20,500 in 2022.

This meant that she was increasing her salary and by a not by an insignificant amount, especially if you adjust for the taxes on the health savings account. I explained that based on her income, which was under the statutory max for singles of $125,000, and that she could make a full Roth IRA contribution instead of saving money in her retirement plan. We ultimately found that with all this new knowledge she could accelerate her savings for a down payment on a house.

Married couples need to take a closer look at both their individual and family employee benefits

In another case of a newly married couple, I was able to look across their two benefit plans. This is, in some cases, about 80 pages worth of information. Not only would this be a lot to read for anyone, but it is also even more difficult for people who are not used to knowing what to look for and how to parse that information. In this case, I noted that the husband\’s employee benefit for healthcare was pretty amazing compared to the wife\’s, which had a high deductible health care plan and the ability to have a health savings account (HSA).

When I looked at the premium reduction between the two individual plans, his plan looked better. When I looked at the maximum out-of-pocket expense between the two plans, for the family, his maximum out-of-pocket was $3200 and hers was $6250. While the wife\’s employer offered much more choice, she was actually in “choice overload.” And having to look at all those choices was going to require a lot of time! Unfortunately for her employer, many of the benefits offered required her to go to a portal rather than simply giving the information in a rather large PDF document.

In all of these cases, when moving to the next employer, each person found themselves subject to changes in philosophy by their new employer. Some lost matching contributions, some lost insurance both life and disability. And in one case, while the new employer indicated the possibility of having more insurance available, there were rules limiting the initial coverage and the possibility of needing to be underwritten if the client wanted to get the maximum available. That was not the case at their prior employer.

Don’t take your employee benefits for granted!

If you find yourself in a “choice overload” or swimming in unfamiliar terms, look for help. You may find that you need to look beyond your company’s administrators. With thousands on the line annually, you owe it to yourself.