Benefits Strategy

"Powerpoints are the peacocks of the business world; all show, no meat." Dwight Schrute 

Feeling overwhelmed by your Health insurance options and choices?  You are not alone.

HMOs, PPOs, HDHP Plans, deductibles, co-insurance costs and max out of pocket costs can be difficult understand as it relates to our personal financial situation and plan. 

The professionals who help you get health insurance (from employer provided insurance agents to HR teams) will most likely not know which plan is best for you. The information they need to ask you might be inappropriate or illegal.   

Changes to help you identify the potential need for further review:

• Starting a family? 
• Taking a new medication?
• Starting or continuing therapy?
• Do you have a planned medical treatment / surgery?
• Has your household income increased over $150,000 per year? 
• Has your household income decreased below $150,000 per year?   

Insurance options that best fit your financial plan at 30 might be a great fit now, but could cost you thousands of dollars or more by 35 or 50.

"Everyone has a plan until they get punched in the mouth." Mike Tyson

Financial plans are fueled by income.  Income from working or income from investments, annuities, pensions and social security.  

Unless you are independently wealthy, most financial plans cannot afford a loss of income during our prime earning years.  (25 - 55) 

It is difficult and not psychologically normal to think we will get disabled or suffer from a chronic illiness that prevents us from working.

However, the reality is we are more than 8 times more likely to suffer a disability vs. dieing.  It is important to evaluate and implement courses of action to protect your financial plan and income from loss until we reach a level of investable assets we can replace our income without a need to work. 

“No one is required to provide personalized advice or perspective in a fiduciary capacity to plan participants in employer provided retirement plans ” – Kit Lancaster CFP

A study by ProPubica and the Urban Institute shows over 56% of workers in their 50s are laid off at least once or leave jobs under such financially damaging circumstances. 

Only 10% of those workers ever earn as much as they did before their employment setback.

At some point, we will not be able to work any longer or simply not want to work any longer.  If we are lucky, we will get to choose when we want to retire.

Our process is designed to help you understand ways to save and invest for retirement. We explore ways to get emotionally, mentally, and financially prepared for a change to a different use of your time after employment. 

Your financial plan is built on your cash flows. Your retirement plan is designed to keep your cash flows going after you stop working. 

We provide detailed guidance and recommendations on all types of retirement plans and retirement strategies.

(401k, 403b, 401a, 457, TSP, SIMPLE IRA, SEP IRA, Deferred Comp, etc.) 

A Health Savings Account (HSA) is a tax-advantaged savings account designed to help individuals with high-deductible health plans (HDHPs) save and pay for qualified medical expenses. HSAs offer a triple tax advantage: contributions are tax-deductible, earnings grow tax-free, and withdrawals used for qualified medical expenses are tax-free as well.

When considering an HSA, consumers should ask themselves the following three questions:

1. Is an HSA the right fit for my healthcare needs and financial situation?

   • Consumers should evaluate their healthcare needs and determine if they are eligible for an HSA. To contribute to an HSA, individuals must have an HDHP and cannot be enrolled in other health coverage that is not an HDHP, such as Medicare or another health plan.
   • Additionally, consumers should assess their financial situation to determine if they have the means to contribute to an HSA. Contributions to an HSA are not required but can provide valuable tax advantages and savings for future medical expenses.

2. How much should I contribute to my HSA?

   • Consumers should consider their anticipated healthcare expenses and financial goals when deciding how much to contribute to their HSA. It's important to strike a balance between contributing enough to cover medical costs while not over-contributing and potentially losing unused funds at the end of the year.
   • Evaluating factors such as deductible amounts, out-of-pocket maximums, and personal health history can help individuals estimate their potential medical expenses and set an appropriate contribution level.

3. How will I manage and utilize my HSA funds?

   • Consumers should have a plan in place for managing and utilizing their HSA funds effectively. This includes understanding the rules and regulations surrounding eligible medical expenses, keeping track of receipts and documentation, and familiarizing themselves with any fees or administrative requirements associated with their HSA.
   • It's essential to evaluate options for investing HSA funds if available and determine the best approach for utilizing the account, whether it's paying for current medical expenses or allowing the funds to grow for future healthcare needs.

At Sterling Edge Financial we can help you understand if an HSA will create value for you and your financial plan. It shouldn't be assumed to create value or be in your best interest.  

A Flexible Spending Account (FSA) is an employer-sponsored benefit that allows employees to set aside a portion of their pre-tax earnings to pay for qualified medical expenses. FSAs are designed to help individuals save money on healthcare costs by reducing their taxable income.

Now, let's address three questions about FSAs that consumers should ask themselves:

1. What expenses are eligible for reimbursement through an FSA?

   • Consumers should familiarize themselves with the list of qualified medical expenses that can be reimbursed through an FSA. These may include doctor's visits, prescription medications, medical supplies, and certain preventive care services. Understanding the scope of eligible expenses will help individuals plan and allocate their FSA funds effectively.

2. How much should I contribute to my FSA?

   • Determining the appropriate contribution amount is an important consideration. Consumers should estimate their annual healthcare expenses, taking into account recurring costs such as prescription medications or expected medical procedures. It's crucial to strike a balance between contributing enough to cover expenses and avoiding over-contribution, as FSA funds do not roll over at the end of the plan year (unless there is a grace period or a carryover provision).

3. How will I manage and utilize my FSA funds effectively?

   • Consumers should have a clear plan for managing and utilizing their FSA funds. They need to understand the rules and deadlines associated with their specific FSA plan, including submission deadlines for reimbursement claims and any available grace periods or carryover provisions.
   • Additionally, individuals should keep track of their expenses and retain proper documentation, such as receipts and Explanation of Benefits (EOBs), to substantiate their reimbursement requests. Familiarizing oneself with the FSA's online portal or mobile app, if available, can also streamline the process of submitting claims and managing funds.

Navigating the world of employee benefits and compensation can be overwhelming, especially when it comes to complex terms like stock options, restricted stock units (RSUs), and deferred compensation. These forms of compensation often play a significant role in attracting and retaining talented employees. However, understanding how they work and making informed decisions can be challenging. In this blog post, we'll shed light on these concepts to help demystify their complexities.

• Stock Options: Stock options grant employees the right to purchase company stock at a predetermined price, known as the exercise price or strike price. They typically come with a vesting period and an expiration date. Stock options can provide employees with an opportunity to participate in the company's growth and potentially benefit from an increase in stock price. However, it's important to note that stock options involve risks, as the stock price may decline, rendering the options less valuable.

• Restricted Stock Units (RSUs): RSUs represent a promise to deliver company stock to an employee at a future date, typically upon the satisfaction of vesting requirements. Unlike stock options, RSUs do not require employees to purchase shares. Once the RSUs vest, employees receive the stock or its cash value equivalent. RSUs can provide employees with a direct ownership stake in the company and allow them to benefit from its performance over time.

• Deferred Compensation: Deferred compensation refers to an arrangement where employees can defer a portion of their current compensation to a later date. This can be done through various vehicles, such as nonqualified deferred compensation plans or retirement savings plans. The deferred amount is set aside and grows tax-deferred until it is distributed in the future. Deferred compensation can be a valuable tool for tax planning and retirement savings, allowing employees to potentially defer income to a lower tax bracket in retirement.

• The Confusion: It's understandable that stock options, RSUs, and deferred compensation can be confusing. The intricacies lie in their varying rules, tax implications, and the impact they may have on an individual's overall financial situation. Each of these compensation forms comes with its own set of considerations and complexities that can be overwhelming for employees to navigate.

• Seeking Professional Guidance: To make the most of stock options, RSUs, and deferred compensation, it's crucial to seek professional guidance. Financial advisors, tax professionals, and certified financial planners (CFPs) can provide personalized advice tailored to an individual's circumstances. These professionals can help clarify the intricacies, evaluate the tax implications, and develop a comprehensive financial plan that incorporates these forms of compensation into an individual's overall financial picture.