Making Your Employee Benefit Selections Now

Fall is the time of year to choose the employee benefits you want for the following year from the options provided to you by your employer. In making your choices for 2020, understand what these options mean for you, your family, and your tax picture.

1. Medical coverage

Does your employer offer group health coverage? Perhaps there’s a reimbursement arrangement available, such as a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) or an Individual Coverage Health Savings Arrangement (ICHRA), which is a new option for 2020. If so, you can use the reimbursements to pay for individually-obtained coverage. Determine the amount being offered by your employer and what you will be expected to pay toward your coverage. Also learn whether you can pay your share of premiums (in excess of what the employer pays for group health coverage or reimburses you for individual coverage) on a pre-tax basis (your employer must offer a cafeteria plan to enable you to do this).

Your employer may enable you to fund a Health Savings Account. Usually this is done on an after-tax basis. But then you can deduct your contributions without having to itemize. Alternatively, learn whether your employer plans to make contributions to your HSA in 2020.

Also decide if or how much to add to a flexible spending account (FSA) for medical coverage in 2020. The dollar limit is estimated to be $2,750 ($50 more than in 2019). If you are married, be sure that both spouses check their respective options to coordinate benefits.

2. 401(k) plans

If your employer offers participation in a 401(k) plan, determine the amount of salary reduction contributions you want to make for the year. In making this decision, take into account what your employee may contribute on your behalf (“matching contributions”).

It’s also a good idea to review your investment options. You may want to make changes in your investment selections for the coming year.

3. Other employee benefits

Your employer may offer other employee benefits. Some may be offered directly to you or through a cafeteria plan in which you select the benefits you want from a menu of options. These benefits may include:

• Adoption assistance. The maximum benefit for 2020 is projected to be $14,300 (up from $14,080 in 2019). However, an employer may offer a smaller benefit.
• Dependent care assistance. The maximum employee benefit cannot exceed $5,000 annually (this is not adjusted annually for inflation).
• Transportation fringe benefit. This benefit may be for parking, transit passes, or van pooling. The maximum benefit in 2020 is projected to be $270 per month (up from $265 per month in 2019). Some employers may offer you the option to pay for monthly transit passes on a pre-tax basis, so decide whether this is something you want next year.

Conclusion

Some decisions about employee benefits for the following year must be made well in advance of the start of the year. Review your options now. If you have questions, discuss them with HR or the person who heads up benefits in your company.