Decoding Your Civilian Employee Benefits:
Understanding and Utilizing Your Perks
Active duty and retired military families are fortunate to have access to good medical and dental coverage options. However, these options often come with limitations and lack flexibility (looking at you Tricare Prime). As financial planners, we frequently discuss healthcare options and the financial consequences with our clients. Perhaps you are transitioning out of the military and are currently facing these choices. Maybe your spouse got a new job (or they have an open enrollment coming up) and you have access to options that weren’t available to your family before. This post will concentrate on highlighting the employee benefits that are typically not accessible through the military and discussing how individuals could benefit from enrolling in them.
Healthcare Flexible Spending Accounts (FSA)
A Healthcare Flexible Spending Account (FSA) is a use-it-or-lose-it account that allows you to set aside a portion of your pre-tax salary to pay for eligible healthcare expenses. The expenses include any number of things not covered by your insurance (copayments, deductibles, prescription medications, to name a few). While a Healthcare FSA might not cover a trip to Disneyland or help you beef up your Lego collection, it does cover some cool real-world expenses. Check these out:
- Heating Pad Teddy Bear (adorable, yes?)
- First Aid Kits
- Allergy Related Items (think anything that can help with sniffles, like antihistamines or nasal spray)
- Maternity Items (prenatal vitamins, breastfeeding supplies, back support, etc.)
- Humidifiers or Diffusers
- Baby Essentials – Nose wipes, diaper rash cream, pain relievers, baby lotion, etc.
- Fitness Equipment – items prescribed by a medical provider that could be eligible for FSA reimbursement include exercise balls, stationary bikes, etc.
Dependent Care Flexible Spending Accounts
A Dependent Care FSA is similar to a Healthcare FSA in that it allows you to set aside pre-tax dollars to pay for eligible dependent care expenses. You can’t use it to send an adult to Lego camp (no matter how many times your/my spouse asks). The qualifying dependent must be under the age of 13 to qualify (with a few exceptions).
Examples of qualifying expenses are daycare, preschool, before/after school care and summer day camps. There are contribution limits for a Dependent Care FSA, which vary annually and are per household ($5,000 for 2023).
Note: DoD civilians, regular (active) component service members, and Active Guard Reserve members on Title 10 orders who have dependents with eligible expenses will be eligible to enroll in Dependent Care FSAs starting in 2023 (for calendar year 2024). See the Federal Flexible Spending Account Program website for more information.
Healthcare Savings Accounts
Healthcare Savings Accounts (HSAs) are like tax ninjas. They offer triple tax advantages: your contributions are made pre-tax, the earnings you receive are tax-deferred, and the distributions are also tax free if you use them for qualified medical expenses.
Note: There are very specific rules on who can contribute to an HSA. Make sure you qualify to contribute to an HSA before you start those contributions. Here are some of the HSA eligibility rules (check out all of the IRS’s rules here):
- You must be enrolled in a high-deductible healthcare plan
- You must not be covered by another medical plan. For instance, if you’re covered by Tricare Prime through your spouse’s employer and you get a new job with an employer’s high-deductible healthcare plan, you can enroll in both plans, but you can’t contribute to an HSA while covered by Tricare Prime.
- Some employers will contribute to your HSA on your behalf. A good rule of thumb: if you aren’t eligible to contribute, then your employer cannot contribute on your behalf.
The best thing about HSAs is that they are not use-it-or-lose-it so you can contribute to these plans and save those funds for medical expenses in retirement. Yes, you can always use them before retirement, but I encourage clients to think of them as another retirement account and pay for current medical expenses out-of-pocket whenever possible. As a bonus of winning the health lottery, if you make it to age 65 healthy and strong, and you don’t need your HSA funds, you can use your HSA to pay for anything – there’s your Lego camp money! Keep in mind, you’ll need to pay state and federal tax on the distributions, but the penalty tax (20%) will be waived.
Life Insurance
One of the great advantages of getting life insurance through a non-military employer is the opportunity to get cost-effective coverage for a family member who might not be eligible elsewhere. The coverage is generally similar to the type of group life insurance coverage available while you’re on active duty (Servicemembers’ Group Life Insurance (SGLI)) and this often does not require individual medical underwriting or a medical exam, especially for new hires.
Weird but Fun Benefits Available Through Some Employers
Legal Plans
Your definition of fun might not include a legal plan but hear me out. Base legal has wonderful free options for drafting your estate planning documents, but there are certain documents you can’t access using our very talented JAGs (see Amy King’s post here for more information on what is available). That’s where a legal plan could potentially help you fill in that gap by offering access to an estate planning lawyer for a reasonable amount. FSAs get all the love but I’m all about a good legal plan.
Gym Memberships, Wellness Reimbursements and Workout Classes
These types of benefits can include on-site gyms, fitness classes, mindfulness sessions, or access to nutritionists and wellness coaches.
Hidden within the depths of your benefits manual’s fine print section, you may stumble upon a treasure trove of additional perks and rewards, waiting to be discovered. Some of these lesser-known benefits include:
- Education Reimbursement
- Pet Insurance
- Discounts on Auto or Homeowners Insurance
- Student Loan Assistance
- Identity Theft Protection
- Donation Matching
- Paid Time Off for Volunteering
Final Note
When choosing your employee benefits, consider your specific coverage needs, review your plan options, evaluate the costs and your budget, and check the network of providers for healthcare benefits. It’s important that the decisions that you make align with your family’s needs and financial situation. Need Help? Reach out to one of our financial planners who will be happy to discuss the advantages and disadvantages of your available choices.
