5 Tips for Setting Up Your Employee Benefits

When you start a new job, retirement is probably the last thing on your mind -- especially if you're young. But let's face it; you, too, will grow old. And if you gloss over the details of your employer's retirement plan, your "golden years" are going to bite.

Retirement benefits vary considerably among employers, but these days most offer some type of defined contribution plan. Under this type of plan, the employee or the employer (or both) makes contributions to an individual investment account like a 401(k). The amount paid upon retirement depends on the value of those investments.

As you set up your benefits, scope out ways to maximize your retirement savings. For example, many employers will match some contributions you make to your retirement account. A common match is 50 cents on the dollar for the first 6 percent you save. This means that if you make $5,000 a month (lucky you!) and contribute $300 to your retirement plan, your employer will give you an additional $150. You wouldn't ignore someone shelling out 150 bucks on the street, so you shouldn't pass up your employer's $150 match, either.

But don't stop there. Financial planners recommend that you save 10 percent of your salary for retirement. So set up an automatic withdrawal to get that money out of your account before you can get your hands on it. If you can't afford that much at first, find out if your employer offers an auto-escalation option that will automatically increase your savings rate over time.

Everyone knows that health care costs an arm and a leg these days, so any health insurance plan is better than none at all. But when setting up your employee benefits, look closely at the available health plans: Some may cost you a whole lot less than others.

Many companies now offer a traditional plan and a high-deductible plan. The traditional plan has a higher premium, which is the amount of money you pay monthly to the insurance company for coverage. However, it also has a lower deductible -- the amount of money you have to spend before your insurer begins paying your medical expenses. High-deductible plans, on the other hand, charge lower monthly premiums, but have more costly deductibles.

The best plan for you depends on your situation. If someone in your family has a chronic medical condition, the traditional plan is best because it pays out more in the long-term. It's also a good choice if you're older or have a large family, since the chances of a severe illness are higher. If you're young and healthy, however, high-deductible plans could save you a great deal of money in lower premiums ... that is, if you manage to stay out of the hospital.

Be on the lookout for other ways to reduce costs. Some employers offer lower premiums -- or even cash -- to employees who participate in wellness programs, which typically provide services like personalized health reports, educational materials, weight-loss support groups, fitness classes and counseling. Sure, it'll be a little more work, but hey, you'll be healthier and richer!

Want to stretch your salary a little further? Of course you do. Check to see whether your employer offers a health savings account or a flexible spending account.

A health savings account (HSA) is basically a savings account for medical expenses incurred only by employees enrolled in high-deductible health insurance plans. A single adult can deposit up to $3,050 a year in this account while a family can put in $6,150. Contributions are pretax, meaning that you don't have to pay income tax on the money. You don't have to worry about your money going anywhere, either. With an HSA, the money stays in your account, year after year, until you spend it.

While contributions aren't typically mandatory, it's generally a good idea for anyone with a high-deductible health insurance plan to put money in an HSA. These funds will help offset the cost of unexpected doctor visits or prescriptions, which are unlikely to be covered under the lower-cost insurance coverage.

Like HSAs, flexible spending accounts (FSAs) are pretax and can be used to save for medical expenses. FSAs can also be set up to pay for dependent care, such as child or adult daycare. The medical accounts are limited to $2,500 in contributions, while the dependent accounts max out at $5,000. One big difference between HSAs and FSAs is that any unspent money in an FSA is forfeited to the employer at the end of the year. So if you decide to open an FSA, be sure to estimate your medical and dependent care expenses based on the previous year. Otherwise, it's not such a great deal!

These accounts are not typically opened automatically, so let HR know which you want and how much you want to contribute each month.

No one wants to pay for something they don't need. And if they do need it, they certainly don't want to pay more than they have to. That's why you should weigh the pros and cons of voluntary benefits carefully before committing to them.

Voluntary benefits are insurance policies and other coverages that are offered through an employer but aren't subsidized by them -- like dental and vision coverage, supplementary life insurance, accident insurance, and short- and long-term disability. When you purchase these benefits through your employer, the premiums will be deducted from your paycheck, which makes things easy for you. But just because it's easy doesn't mean it's a good deal.

Before signing up for a voluntary benefit, ask HR if you're getting it at a discounted rate and if there's any real advantage to purchasing it through them. Then ask yourself if the benefit duplicates an insurance or service that you already have and whether it's really worth your money. For example, what use is vision coverage if you're young, single, and every checkup you've had since childhood has been perfect?

And never sign up for a voluntary benefit that you could get somewhere else for a better rate.

Have you ever bought a book or a DVD only to return home and find out that you already have it? It's frustrating, but at least you can return it. Now imagine spending thousands of dollars on an expense or service that you later discover your employer would have paid for. Unfortunately, many an employee makes this wallet-wrenching discovery because they never really combed through their benefits packages.

Employers offer all kinds of free or subsidized benefits to try to lure good employees to their organizations -- tuition assistance, student loan repayment, legal and financial services, counseling, daycare, adoption services and moving expenses. Some companies even offer luxuries like paid workouts and employee concierge to their workers. While the last two examples aren't exactly commonplace, you'll never know what you could bank in on unless you ask HR for a list detailing all employee benefits. Find the ones that are both valuable and useful, and take advantage of them.