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The dos and don'ts of FSA open enrollment

Let’s face it: Almost no employee looks forward to open enrollment. It’s a time when employees are faced with big decisions, get a pile of information usually at a busy time of the year, and would be more than happy to have benefits experts provide them with advice on what to do—with most experts dodging the advice-giving role.

One tip that won’t be a miss for your employees—anyone who has routine and predictable expenses should consider signing up for pre-tax health care, dependent care and commuting accounts during the next open enrollment. Why? They can save thousands of dollars—up to 40 percent of the total expenses they have.  

To make it easy, here are a couple “dos” and “don'ts”:

DO: Dedicate the time now for big savings later in the year

While signing up for a pre-tax health care, dependent care or commuting account requires some research up front, the small investment of time to understand the accounts and enroll will pay dividends later in the year.  For employees who aren’t sure how much money to contribute, there are plenty of online calculators available to calculate expenses and predict savings—like these from my company, WageWorks, Inc. Ultimately, pre-tax accounts are designed exclusively to save participants money, so be sure not to overlook them. And, if employees are worried about predicting expenses accurately, they should start low—but start with some amount so they can give the power of these accounts a try. 

DON’T: Avoid enrolling because of the “use or lose” provision

One of the main reasons eligible participants choose NOT to enroll in a health FSA is the “use or lose” provision-- participants forfeit unused money in their accounts at the end of the plan year. But “use or lose” is no reason to avoid enrollment.  By looking at past year’s expenditures, most participants are able to decide on a contribution that won’t leave them with a surplus at the end of the year.  For participants who do have money leftover, there are plenty of ways to spend-down account balances at the end of the plan year. Participants can also be sure they won’t have money left over by electing to set aside a conservative amount in an account, which will still provide significant savings.

DO: Ask HR managers key questions

Employees should connect with the number one office resource to understand their company’s pre-tax accounts: the HR manager.  The actual design of the accounts can vary from one company to the next, so it’s important to understand any nuances of a company’s pre-tax benefits accounts.  However, across the board, starting this year, a provision of the new health care law changes the way health care FSAs are administered by capping an employee’s contributions at $2,500. 

DON’T: Assume FSA enrollment is automatic

Even though many benefits, like health insurance, don’t require employees to re-enroll from one year to the next, FSAs typically require active renewal. Employees should look for FSA enrollment forms from benefits managers each year when they get their benefits package and fill them out. Don’t be lulled by the seemingly easy to administer “evergreen” approach to benefits enrollment.

For benefits professionals, “dos” and “don'ts” of open enrollment season may seem routine.  But it’s important to remind employees of how best to navigate open enrollment and stretch their paychecks most effectively.