Employee Benefits 101 - Understanding your options

Today's Webinar is titled "Employee Benefits 101: Understanding Your Options," and our presenter today is Judy DeCourcey, senior benefits specialist in RIT's human resources department where she has worked for over 18 years. Judy has worked in the employee benefits field for 30 years. Prior to joining RIT Judy worked in the corporate office of Goulds Pumps in Fairport, New York, Massachusetts Institute of Technology and a large Boston-based law firm. Judy earned her BS in business management from Skidmore College in Saratoga Springs, New York, and her MBA from Northeastern University in Boston. She holds the designation of Senior Professional in Human Resources from the Society for Human Resource Management. Judy also serves as a director and a secretary of the New York Employee Benefits Conference. Judy has been a speaker on a variety of benefits topics at meetings and conferences including for the greater Rochester Chamber of Commerce, New York Employee Benefits Conference, Fidelity Investments, and the College and University Professional Association for human resources. Welcome, Judy. Let's get going. >> JUDY DeCOURCEY: Great. Thank you, Cindy and thanks to Joe, our technical guru, and our captionist who's helping us today as well. Cindy told me I could come up with a catchy title and I couldn't think of one and I thought, well we're at a university we'll call it Employee Benefits 101. I just want to click here. Okay. There we go. So today we're going to talk primarily about benefits, but before I do that I do want to talk a little bit about something called a total rewards strategy, because really it's not just about your pay. And as we go through it I'll provide some hints, with that hint star on some of these screens to help you, you know, think about certain things that may impact you. So Webinars. I've been in a lot of Webinars where you are sitting, and sometimes they're pretty boring and you're napping, you're looking out the window. I usually check emails. So hopefully you're not doing too much of that, but at least maybe you'll pay attention when you get to that little -- when you see a pink on the screen. So before we get started, I do want to have a better understanding of who's in the audience. So we have a poll question. If you could indicate how old you are for us, please. A few people paying attention already. Joe is going to tell me when we're done with the poll here. A pretty varied group. That's good. Okay. I think we're good. Okay. Great. Just going to take a second to close here and then we'll see how we do. So a pretty broad audience, so that's really good. And the information really impacts everybody but it just helps me in a couple of the topics that we're going to have here this morning -- or this afternoon, I guess. It's afternoon here, on a sunny day, I'll add. All right. Great. So continuing then -- got to love technology. So total rewards. We all know about the money part. We all are concerned about our paychecks, but there are a number of things that we get for working as an employer that aren't necessarily monetary but people have to perceive those, employees have to perceive those as really valuable. So there are five key elements to this reward strategy. Obviously your pay; benefits, which we'll talk about today; a work life balance. I don't think people are as interested these days in working 80 hour weeks. They want to have a little personal time too. Performance and recognition. If you do a good job you want people to notice that, you want to be recognized for your good performance. And a lot of people really want to have some career opportunities and so employers who are offering professional development so that you can further your career. Today we're really going to talk about benefits. And it's really benefits are a way to really protect your income and your standard of living. So, for instance, cash flow. We protect our cash flow because you have medical coverage, so it protects you if you have large medical bills. Income replacement. So if you become disabled and you're not able to work, you still have some income coming in. Survivor income, if the employee passes away, there's something for your survivors. And then preparing for retirement and making sure that you have adequate retirement income. But they're very costly benefits, so why would an employer provide benefits? They want to be competitive. You know, if you have two job offers that are the same kind of jobs, all the same kind of opportunities, same pay, one has benefits and one doesn't, obviously the one with the benefits is a much more valuable option for you. For employers who pay taxes, you know, for-profit organizations it can be very tax effective because the benefits can be provided and on a tax-free basis from the employer's benefits. Some employers disagree with this, but I think most of the time employers care about their employees. By offering benefits on a group basis you can really leverage -- the employer can leverage those costs because they can bring a lot of people to a particular vendor. And then of course our friends in government will require some of these benefits as well. So most of the benefits actually that an employer offers aren't really required. They're really optional or voluntary from the employer's perspective, but they offer them really for those reasons that I mentioned a couple minutes ago. The benefits really can vary by the size of the employer. If you're working for a large employer, they usually will have a pretty broad, comprehensive program. Smaller employers may not offer as much in the way of benefits, so it really depends. The first thing I wanted to mention is when do benefits begin, and this is really for most things up to the employer. Benefits -- for instance, your medical coverage could start the day you're hired, the first of the month after you're hired, the first of the month after you've worked 30 days. So my first hint here today is to keep that coverage effective date in mind. Make sure you know what that is if you're looking at a new employer. So, for instance, if you need medical coverage and medical coverage starts the first of the month after you're going to start working, maybe you start the 29th of the month instead of the 3rd. There's a number of kinds of benefits, some that the employer offers and pays the full cost for, and again, some of those are required, but most are not. A lot of times the employee and the employer share in the cost. An employee can pay for those on a before-tax or after-tax basis, and I'll talk about that in a little bit. And then there's some voluntary programs that are optional -- or supplemental programs that employers offer that are fully paid for by the employee on an after-tax basis. And then there's a few other miscellaneous things I will talk about at the end. So I mentioned there are some benefits that are required or statutory, mandatory. The first one is FICA tax, which we're probably all familiar with, and there really are two parts. There's the Social Security, which is 6.2% of pay on the first about $118,000 of pay in 2016. So if somebody's pay is over that limit they don't pay any more Social Security tax for that calendar year. Medicare tax is 1.45%. That's on all your pay. That doesn't stop at all during the year. There's unemployment insurance, workers' compensation. That's to provide some income to you as well as pay for medical bills if you're injured at work. And then short-term disability. There are five states, California, Hawaii, New Jersey, New York, Rhode Island, who require short-term disability. As far as paying for benefits from the employee's perspective, usually employees pay for those through payroll deduction. Some of the voluntary benefits a person may pay direct to the vendor, but generally it's through payroll deduction. And many of them can be paid for on a pretax or before tax basis, and that tax savings can be pretty significant, and I'll go through an example in a minute. If you contribute to a retirement plan, a 401(k) or 403(b) plan, those are subject to FICA tax, and then some states don't have income tax, and there are other states that may not allow pretax contributions. So I did want to mention that because I figured we may have people from around the country. So the most common pretax benefits, medical coverage, usually the employer and employee share in that cost. Dental insurance, again, cost saving. Flexible Spending Accounts or FSAs, Dependent Care Spending Account and Health Care Spending Account, those are employee contributions, and a retirement plan 401(k) or 403(b), and usually the employee and usually the employer will contribute. So I mentioned about the tax savings. I'm not going to read all of these numbers, but basically in this example the pay period salary, $1,250, and all of these benefits listed can be deducted on a pretax basis, and so what that means is that instead of paying taxes on $1,250 a pay period, the person is paying tax on $847, which in this case amounts to almost $3,500 a year in tax savings. So it can be pretty significant. So the first thing I want to talk about it medical coverage. There really are two benefits that in my opinion are really important to think about, and obviously this is one of them. So under the Affordable Care Act, an employee can cover children up to the age of 26. The child does not have to be a tax dependent, doesn't have to live at home. The child could even be married. It doesn't matter. It's only an age test. And the child is even eligible if he or she has their own coverage. It applies only to medical under the ACA, so many employers do provide the same rules for their other health care benefits like dental and vision. So my first -- we had a few people who are under age 26. If you can be covered under your parents' policy right now. It's their choice. Obviously they have to choose to do that. Even if you have a job with coverage. I always want to caution, though, if you live in a different geographic area, the coverage may not make sense because sometimes the benefits aren't as rich when you live outside the geographic area, but that's something for to you chat with your folks about. So a few terms, you know, in the benefits world, we have a lot of acronyms and a lot of terms, so I thought I should really talk about these medical plan terms. So the first one is a co-pay, and that's just a flat dollar amount. When you go to the doctor for an office visit you pay $20. It doesn't matter how many (inaudible) you have or how long the doctor spends with you it's $20. A deductible is the amount you have to pay before the plan covers anything, so when you go to that doctor visit you're going to pay the full cost up to the deductible, for example, $300, and that's an annual amount. Co-insurance is a percentage, so usually that goes hand in hand with a deductible, so first you pay your deductible and then you're going to pay a percentage, for instance, 20%. So if you met your $300 deductible, then you pay 20% and the plan pays 80%. And then the last one, the out of pocket maximum, really protects you from significant out-of-pocket costs for covered services. So first you have your deductible, then you have the 20%, and you keep paying that 20% until you reach that out of pocket maximum. And that is a calendar year number so then you -- next year you start all over again with your deductible and your co-insurance. So there's different kinds of medical plans. Our little alphabet soup plans we'll talk about. The first one are indemnity plans. They're not very common anymore. I did want to just mention those. It's a kind of coverage that, you know, my folks had years and years ago. It's really traditional coverage that really just focuses on covering people if they're ill or they're injured. Usually has that deductible and co-insurance. You go to whatever provider you want. I did want to mention it's different than what we call a high deductible health plan, but we don't see too many of these plans anymore. More common over the past 20 years are managed care plans. Those really started focusing people on keeping healthy or getting healthy, controlling unnecessary costs, and there are three types. There's HMO, or a health maintenance organization, a PPO, which is a preferred provider organization, and then lastly a point of service, a POS plan. So the common features for an HMO has this primary care physician, your ***, who really acts as that gatekeeper, refers you to specialists. So if you're having some kind of a problem first you see you your primary care doctor. That doctor would then refer to you a specialist. Usually you have co-pays instead of the deductible and co-insurance, and there's a network of physicians who participate in that HMO. Under a PPO they will have in-network and out of network. It's better for you, cost-effective for you if you stay in-network. These will often have deductible and co-insurance, up front, and then the percentage. Sometimes they may have some co-pays for some of the in-network services, but it doesn't really have that primary care physician gatekeeper model. Usually go to the specialist, if you want, without any referrals. A point of service plan, a POS plan, again, has in-network and out-of-network benefits. It's sort of a hybrid, I call it, because the in-network is much like an HMO and the out-of-network is very similar to a PPO. So you have that primary care physician for your in-network benefits. Typically you have co-payments. Deductibles and co-insurance is what you really see on the out-of-network, and so therefore it's to your benefit financially to see in-network providers. The out-of-network is really there if you choose to use an out of area provider or out of the network provider or if you decide to go to a specialist if there's a referral needed and you didn't get it. The last type is becoming much more common and some of you might actually be in this type of a plan. It's a consumer driven health plan or a high deductible health plan. More and more employers are putting these plans in place. You know, I talked about these co-pays. None of us have known what an office visit costs at a doctor. You pay $20 but you have no idea what that costs. So people, you know, the runny nose, you run to the doctor. And so we've seen big increases in medical costs, and these plans are really designed to help people -- more like the consumer, understand more about the cost, making better choices before seeking medical care. The one issue -- it's improving, but it's still not great -- is really understanding the real cost and the quality. I mean, if the doctor is really bad and is cheap, it probably doesn't make sense to go to that doctor. So quality is a pretty big factor here as well. Like I said, that is not as readily available right now in a lot of cases. Typically it's that PPO model and it has a high deductible, and these high deductible amounts are actually set by the federal government. So in 2016 it's $1,300 for an individual and $2,600 for a family. Then you have co-insurance and out of pocket maximums that protect you. Most of these plans do cover preventive care at 100%, and typically that's exclude from that deductible and co-insurance, and that's really to encourage people to have those routine physicals, to have those screenings, to really try to stay well, understand what's happening before the big costs come up. So I'm curious, do any of you participate in a high deductible health plan? So a simple yes/no -- we added "not sure" the other day because I thought maybe some people might not know. Some of you are. More aren't than are, but, you know, again, that really will depend on the employer and what their situation is. Have we closed that yet? Almost. There's still plenty out. I should have prepared some jokes while waiting for the polls. Sorry. Next time, Cindy, remind me, I got to make a few jokes. Thank you. She didn't write that down, just so you guys know. So more of you are not in a high deductible health plan, but -- and RIT incidentally does not have that. Someday in the future we might. So we will see what the future holds for all of us. Okay. Every time I do a poll then it doesn't like to click. There we go. The other part of high deductible health plans I probably should have mentioned this before the poll, they're usually along with a type of a Health Spending Account, either an HRA, a Health Reimbursement Account, or a Health Savings Account, an HSA. And people can use the funds before the plan pays so the up-front high deductible. The HRA is a tax-free account. Account is in quotes because really, it's not real money in some bank account. The employer funds some amount, and the amount can roll over year to year. So if you have an HRA and you don't use any of the money this year, it would be available to you next year. But if you terminate employment, the employer can retain that money. It doesn't go with you, necessarily. The Health Savings Account, both the employee and the employer contribute. There are some maximum amounts set by the government. It has to be paired with that high deductible plan, and it is an account. There's real money in that account. The thing that's very nice about the HSAs is that if you leave that employer that is your account. You can take that with you and use it at your next employer, for instance. So prescription drug and vision. They can be part of your medical plan or they can be separate. Again, that depends on the employer. It depends on the plan. And I did want to mention on prescription drugs that sometimes the plan will be designed where it's financially better for you to use their mail-order program, so you want to pay attention to that. And then I had a picture about generics. I know sometimes people get a little weirded out about taking generics, but they have the same active ingredients so you really could save yourself some money if you look for generics instead of a brand name. But that's something you would want to talk to your doctor about. And the vision care, not all medical plans cover eyeglasses or contacts. Some do, or it could be carved out, as I said. So you just want to understand what those benefits are. So the cost for coverage -- I have another hint, actually two hints, two for the price of one. The plan that has the lowest employee contribution isn't necessarily the least expensive plan for you on an overall basis, but the plan with the highest contribution isn't necessarily the best plan for you. It doesn't mean it's, you know, going to cover everything. You really need to keep in mind how much your co-pays are, your co-insurance, you know, how much are you going to pay for your services, what is covered, what is not covered, you know, what is it that you need or your family members need as far as medical care and to really look at all of those factors before choosing a plan. Don't just look and say, oh, this one is only $2 a pay period. I'm going to get this plan because it's cheap. You could have some significant out-of-pocket costs if you have services. So keep that in mind. So I'm going to go into dental coverage. This one is actually pretty simple. Usually there are three service categories for dental. There's the preventive, which is your cleanings and your annual X-rays. Restorative usually will have two parts, the basic or the minor restorative, which is your fillings, your root canals. The major restorative, I always call this the painful expensive stuff, like crowns and bridges. And then the last categories is orthodontia, so braces. You want to be careful because a lot of plans will just cover braces for children, so if you're thinking about getting braces before you go down that path you may -- you really should understand if your plan is going to cover that for you. I wanted to mention about coordination of benefits, and I put it here in the dental section because that's where we see more people coordinating. Essentially what that means is two people in the family have dental coverage. So you want to understand how that works for your plan, though, and if you're, say, coordinating with a spouse, how your spouse's plan does the coordination. So maybe you want to take a look at this annually. Is it better for you to cover both of you or your family or the spouse to cover you. If you're a married couple with no children are you better off with two individual policies? So really taking a look, similar to the medical, what the plan covers, what the costs are, what your out-of-pocket costs are, that sort of thing. But you want to understand how that COB works, and there really are two kinds of coordination. The traditional coordination where the primary plan pays, so let's say you have coverage and your spouse has coverage, so your plan will pay first, then your spouse's plan will pay but no more than 100% of the cost, so you're not going to get a little windfall there. So for example, it's the primary plan, if your plan pays 80% and your spouse's plan pays 50, the secondary plan will pay toward those covered services up to that 100%. So potentially that remaining 20. So it might end up being something covered in full. In non-duplication kind of coordination, the secondary carrier is only going to pay -- they're really going to pay as though they were the primary, no more. So if the primary plan pays -- covers at 80%, the secondary plan covers at 50%, the secondary is not going to cover anything at all because they said, well, you've already had 50% covered under the primary plan so we're not going to cover. So you want to understand that non-duplication. Where I think a lot of people do the coordination for dental coverage is really if they have children with orthodontia, if -- or if you know you're going to have some expensive dental work done in the next year. The next thing is flexible spending accounts. These are governed by the Internal Revenue Code under Section 125. Essentially it's allowing employees to choose between getting pay, cash, and taxable cash, I should say, and then nontaxable benefits, like your medical coverage. And so the one thing here that people don't realize is when you're paying pretax for your medical coverage, dental, vision, that's really part of the Section 125 under the Internal Revenue Code. That's how employers are able to offer that on a pretax basis. But the other component of that is the flexible spending account. And because you're not paying tax on this the government has rules about when you can make changes and what kinds of changes you can make, so that's important to understand going forward. So essential the flexible spending accounts are ways for you to pay for eligible expenses with tax-free dollars and there are types of accounts. There's a Dependent Care Spending Account. The IRS sets that maximum at $5,000 per family. The Health Care Spending Account didn't used to have a maximum set by the IRS, but a few years ago that was introduced and that's 2,550 per employee. The Dependent Care Spending Account maximum hasn't changed since, I don't know, the late '80s. Health Care Spending Account now changes every year -- or may change every year depending on the indexing. Usually employers will have this on a calendar year election. The different kinds of things under the health care, it's really covered services where you have out-of-pocket costs. So those co-pays when you go to the doctor or co-pays when you pick up a prescription, coverage for an ambulance, those sorts of things. Those are things that are covered. The things that are not covered would be cosmetic surgery. You know, if I don't like the way my nose looks and I want to have that taken care of, it's not going to provide any reimbursement for that because that's not a covered service. Under the dependent care, mostly people use this for when they take their child to day care or if somebody comes in the home. It's really so the employee and the employee's spouse can work, or in the case of the spouse, go to school full-time. So you really want to -- you have to figure out the amount you want to contribute because you're really going to reduce your pay by this amount. So you need to think about the dollars that you will spend or what you expect to spend for health care for the dependent care, and there are two separate accounts, so you can't move money from one to the other. So you decide on that amount. It's taken out of your paycheck before any taxes are calculated. It's set aside in a separate account, and then you submit for reimbursement, and you don't pay tax when it comes out of your paycheck and you don't pay tax when you're reimbursed. So I have an example here. So you figure out what your expected costs are, so you have prescriptions, regular prescriptions, let's say those are $600. You purchase -- you expect to get some eyeglasses for $150, and so that's a total of 750. If you're paid 24 times per year you're going to have $31.25 come out of your paycheck every pay period before federal FICA and state taxes, in most states. Then you can pay the provider, and then you get reimbursed for what -- that $750 ultimately, and you never pay tax on it. A lot of employers offer now what's called a debit card or a flex card. It's really like a credit card and you can pay at the time of service for, say, the eyeglasses or the prescriptions, and those sums come right out of your account. You don't have to fill out claim forms and submit those. You should always keep copies of your receipts, however, in case you're ever audited. I should have made that a little hint there for you. There are rules, I mentioned earlier, because you're not paying tax, so the IRS gets to make some rules. Generally you're going to make these elections during the employer's open enrollment period. Most employers have these -- this open enrollment period in the fall, but some are during the year, depending on the type of employer. The one thing that scares people is this use it or lose it rule. You know, if I put in that $750 and I didn't use any of it, let's say I didn't get any prescriptions, I didn't do the eyeglasses, I can't get that money out. And so that scares people. So you just want to plan carefully when you decide on that amount. As far as the access to the money, the Health Care Spending Account is available to you day 1. So if I ended up having some major dental work done in January on that $750, I could get that whole 750 covered in January, whereas it wouldn't be there if I was doing the prescription and the eyeglasses later but it's available immediately. Under the dependent care account that's available only up to what you have contributed through that most recent pay period, so the full annual amount is not available. So the eligible expenses have to have dates of service from January 1, if it's a calendar year, or your participation date if you're hired midyear, through December 31. So the hint here is to really understand those deadlines for when claims have to be submitted and any other special rules. You know, I talked about that use it or lose it feature, I'll call it. The IRS has offered a couple of options that a plan can adopt. A plan is not required to have these, but can only have one. The first one is called a grace period. That was introduced quite a number of years ago, where you're actually able to submit claims with dates of service through the next year through March 15 against last year's account. So if I haven't used up that $750 in my example by the end of December and then I went and bought my eyeglasses in January of 2016, I could have that go against my 2015 account. But you only have until March 15, dates of service through March 15. The rollover feature is a little bit different. That one, you can roll over money from one year to the next anytime. You don't have that March 15 deadline, but you can only roll over up to $500. So the grace period -- if I signed up for that full $2,500 for the year and I never used it, that full $2,500 is available to me from January through March 15. Under the rollover I can only roll over 500. Not all employers have one of these options so you want to understand that toward the end of the year when you're trying to figure out what you're going to be spending money on. And then understand when the claims need to be submitted, any manual claims that you might have. Usually it's 60 to 90 days into the next calendar year. So a hint here about enrolling and making changes in your benefits. Usually you're going to sign up for benefits as a new employee. I mentioned that there's usually an annual open enrollment, and normally you can't make changes during the year. A lot of plans have what we call the 31-day rule, so you want to make sure you understand that. The IRS allows this 31-day rule that employers usually adopt for qualifying statistics changes, so marriage, divorce, birth or adoption of a child, if your spouse gains or loses employment, but the change has to be consistent with the event. So if I get married it doesn't make sense to go from family coverage to individual coverage, if I were covering children. It makes sense to go from individual to two-person. So that event has to be consistent with what you're trying to do. So make sure when you have, you know, kind of this event in your life that you need to deal with that pretty quickly, because if somebody comes in and says, oh, I want to add my spouse to my coverage, I got married, and they got married two months ago, they can't be added. So it's really important to pay attention to that. So next I'm going to talk about COBRA. And this -- another one of our acronyms. This essentially is -- is a federal rule that allows people to continue health care coverage when they lose that coverage. So, for instance, if you leave an employer, for those of you who are under age 26, if you're still covered by your parents, eventually you're going to come off that coverage, and so it's a continuation of that same coverage, either 18 months or 36 months, depending on the event, and you don't have to answer any health questions. It's a continuation of the same coverage. The down side is it's very expensive because it's the full premium cost-plus the 2% administrative charge. So under the Affordable Care Act now people do have some other options, so now they're really comparing COBRA to what's available out in that marketplace or the exchange to figure out what's best. There are deadlines associated with electing coverage under COBRA, so you want to pay attention to that if you have children who are aging off your policy or if you're under 26 and coming off your parents' policy. Next is retirement. To me this is the other really big one. It's a little more complex but it's super-important for you, and it's really that somebody we all want to retire, and we want to maintain your preretirement standard of living. In my case I think I want to have a better standard of living because I want to spend money, because I'll have time, and I'd like to travel, for instance. So experts typically talk about the 70 to 80% replacement, replacing your preretirement income. And you'll have some different sources for that income. Sometimes people work after they retire, and it could be that they just want, you know, just a little job to keep active and be out there a little bit. Sometimes people have to financially because they can't make ends meet. Social Security, any income from your employer plans, any personal savings, those sorts of things. So those are really your sources for that income. There are two types of retirement plans an employer might offer, something called a defined benefits plan and something called a defined contribution plan. So I'm curious if any of you contribute to a retirement plan at work. Yes or no. I decided not to put not sure here because I figured you probably know, but maybe not. Excellent. Very good news. So most of you are participating. Those of you not participating, it could be that maybe your employer doesn't offer you an option to contribute, but certainly if -- if you have that opportunity, you should definitely take advantage of it. So just waiting for the final results. Okay. Are we good now, Joe? >> Yes. >> JUDY DeCOURCEY: So most of you are participating so that's good news. So first of all talk about the defined benefit plan. Traditionally people have called that a pension plan. Those are really becoming less prevalent these days, but the benefit is really based on a formula, usually taking into account your pay and your years of service with that employer, and it's called a defined benefit plan because you know at any time what that benefit is when you're going to retire. You know, maybe it's $25 -- or some percentage of pay for every year of service, something like that. Typically the employer contributes to these plans, not the employee, and really the employer is the one at risk for the investment performance. So if somebody is in a defined benefit plan and the starting takes a big dip, the employer has to contribute more money to the plan to make sure that the plan is funded enough to cover all of those obligations or those promises that have been made to the participant. Nowadays, though, we see really the defined contribution plan, either a 401(k) plan or a 403(b) plan. Those are both code sections under the Internal Revenue Code. Those amounts are really based on how much you've contributed, maybe the employer has contributed, plus the investment return, either up or down, and it's called defined contribution because we know that what contribution is. You don't really know what the ultimate benefit is. You only know how much you have there today. And the employee isn't really at risk on that financial performance, so that's important, especially as you get older and closer to retirement. There are a couple other times of contributions, the traditional pretax which are before federal and state tax, would be subject to FICA tax, and then we're starting to see more plans introduce a Roth contribution feature where you make your contributions on an after tax basis and any qualified withdrawals are tax free, including the earnings. So that can be pretty significant. There is a limit on how much you can contribute, again, set by the IRS. Most people, it's 18,000. If you're over age 50 this year your limit is actually higher, it's at 24,000. Oftentimes there's a matching contribution from the employer. Some plans have some automatic enrollment features or automatic annual contribution increase features which is really nice. So two hints here. So the first one is really important. If you have a match from your employer, you should contribute at least the amount needed to get that match. So if you need to contribute 5% to get the employer match, the highest employer match, don't contribute 4, go right to, at least at a minimum, to that 5%. That's really important. Otherwise you're walking away from free money. And the Roth feature that's becoming more popular, if your plan allows that, that's something to consider, especially if you're young. I put young in quotes because young keeps moving for me, but because those earnings grow tax-free -- you know, I should add these are what the rules are today. It's hard to say what will happen to this in the future, but under state rules those earnings are also state-free. I did want to mention about vesting, and that really applies to the employer contributions, not the employee contribution. It's really when you're eligible to receive that money if you leave employment. It's a graduated schedule, usually, so, for example, if -- after year 1, you're eligible, say, for 25% of that employer portion of the account. After year 2, 50% and so forth. So my hint here is, before you're leaving an employer to go take that next big job, understand those vesting rules. You know, you'd hate to leave an employer a few weeks before you're eligible for the next vesting threshold, or at least you would want to know so you're making an informed decision. So pay attention to what those vesting rules are. Access to the retirement plans. Some employers will have rules where you can't access the funds at all while you're working. Some do allow some in-service access, for instance loans, or hardship withdrawals, and the IRS defines what those are. After age 59 1/2. Also when you're leaving employment you could have access. You could leave it in the plan that you left. You would want to understand if they charge any kind of fees. You could roll it over to a new employer plan if it's allowed, or roll it over to an IRA and then you avoid any taxes and early withdrawal penalty. Obviously the best advice is try to keep it in this tax-deferred arrangement since those funds really are there for your retirement, so you don't want to take a distribution when you -- well, maybe you do, I was going to say, go buy a boat or something, but it's best to try to leave it there for your retirement. So I want to talk about some of these barriers that people have, you know, why they're not saving or saving enough or saving more. A big one is people think they can't afford it. So really prioritize this. Make this important. You know, if you stop and get a coffee every morning before you go to work, maybe you just give that up one day a week. You know, this gives you a few extra dollars that you could then put into the plan. So really think about where you're spending your money and what can you give up just to get a little bit more money in the plan. Inertia and confusion is a really big one too. It's really important, and these plans can be very complicated. You don't really understand what's happening. Ask your human resources folks for help. That's why they're there, and they can help you, because it's so easy to set the form aside or the URL if you have to log in to sign up. You know, I'll do it tomorrow. Make it a priority for you to do. People, think about, oh, it's so far away, but the compounding is huge, even if you start with a small percentage and increase just a little bit every year. Check to see if your plan has an automatic enrollment increase feature and sign up for that, and every year just have your contribution go up even 1%. It makes a big difference. So I have this slide here just to show you about the compounding. So on the left we have Maria. She started at age 25. She was paying attention and thinking about her future. She saved $10,000 annually, but she only did it for ten years. Tom, on the other hand, also was starting -- contributing 10,000 but he didn't start till he was 35 and then he contributed every year, a total of 32 years. But as you'll see here from the compounding alone, Maria has a lot more money than Tom, and she put in a third of what Tom put in. So the compounding is pretty significant. You know, so for those of you who are younger and thinking, oh -- you know, the under 26-year-olds in the audience, I don't need to say, think about this slide and get into your retirement plan. Some other things. The investment phobia is really big. You know, people don't know what to choose. It's very complex. Ask questions. You know, maybe your HR department sponsors some workshops to help people. Maybe they have some referrals for you to talk to people. Sometimes people use what are called target date funds. These funds really are based on your age, and so the fund that you invest in if you're 30 is much more aggressive, more in the starting than if somebody is investing in the fund for somebody who's 60. So it's really based on your age, that target retirement date, your 65th birthday. So think about that. People get worried about putting the money into the plan because they might need it. Again, it's really here for your retirement, but some plans do allow for loans or hardship withdrawal, so sometimes if there is a need, there is a way in some cases to get that money out. People always think about, oh, I'd better save for my child's education. Put your retirement contribution first. You know, your kid can borrow money to go to college but you can't borrow to live on when you're in retirement. I always joke that my kids, you know, would rather take a loan than have me come live with them in a few years, I think. Concern for people and that impact on the take-home pay. If I set up for 5% I don't really know what that's going to do to my paycheck because of the tax implications. A lot of places now have these calculators where you can do some calculations to better understand that impanel. And then if an employer allows to you make changes regularly, sign up for something. Make that stretch contribution, and if you can't do it, then reduce it. As long as your employer lets you make contribution changes whenever you want, you have that flexibility. So don't be afraid about that. So really prepare for a successful retirement. You know, my hint, I have a few here, save as much as you can afford to save. Increase your contributions when you can. You know, if you have a big bonus or a lot of overtime, maybe you temporarily increase your contribution as long as your employer allows you to do that. Try not to take those distributions or loans. You know, leave the money there in the plan, so I put the little palm tree because that's what I think about when I think about retirement, kind of relaxing on the beach. So survivor benefits. These are really benefits to provide if you were to die what will happen. So there's term life insurance an employer could provide. Designated or cash loan value. Under the Internal Revenue Code the first $50,000 can be provided tax-free. There's employer provided coverage, and employee paid or voluntary or supplemental coverage. So employers will offer universal life or whole life, and that's a cash value, investment fund. Dependent life insurance, so if you wanted to purchase life insurance for your spouse or your children or your domestic partner, if the employer allowed. There are some insurance laws that govern some of this. Accidental death and dismemberment insurance. A lot of times these will mirror the life insurance benefits. Sometimes there's an issue in determining, you know, what the cause of an accident was. If somebody is in a car accident and died, did the accident -- did the person have a heart attack and die and that's why there was the accident. So sometimes those can get a little sticky. A lot of employers will have business travel accident insurance. That covers you when you're on employer business. Doesn't cover you when you're commuting but it covers you if you were to go to a conference out of town, for example. Usually an employer is going to provide some level of life insurance, usually term insurance, because that's the least expensive, and they might also have some AD&D coverage. They also might offer coverage for you to purchase on an after-tax basis, so supplemental life insurance, that's for you, insurance on your life. Coverage for your children, your spouse, your domestic partner, and as well as -- AD&D insurance as well. It's important to keep your beneficiary insurance up-to-date. You wouldn't want to see that money going to somebody you didn't choose. Disability, that's really an income replacement to help you if you're disabled and you can't work, you need to have some income. You could have sick leave salary continuation, short-term disability, long-term disability, workers' comp. I didn't have a real statistic on this one but I've heard from folks that you're more likely to go on disability than to die, so think about, you know, any supplemental disability coverage that the employer might offer. And just a few other things, some voluntary types of benefits that an employer might offer. These are really going to be employee paid on an after-tax basis, but there's long-term care insurance, there are group programs, auto insurance, homeowners insurance, legal services plan, savings bonds. Under Section 529 of the Internal Revenue Code there's a way to save for college. Pet insurance, that's medical coverage for your pet. Identity theft protection, and then critical incident and cancer insurance are some others that we've seen out there. Time away or time off benefits, vacation, sick, personal time, holidays, bereavement, jury duty. A lot of employers will pay for jury duty. Then a few other things. It's typical for employers to have what's called an Employee Assistance Program, an EAP. You know, years ago it was really just counseling. You know, I'm having trouble with my husband or I'm having trouble with my teenage kid, and you could talk to a counselor. Nowadays it's much, much broader. There's oftentimes legal help, financial help, a lot of on-line resources. So if you have an Employee Assistance Program, an EAP where you work, I encourage you to take a look because you may find that those services are actually very helpful. When I was looking to help my parents look for a senior living community, I went to RIT's EAP and they gave me a lot of great information, great resources. Take advantage. Some employers do reimbursement for tuition, if you're working on another degree. Reimbursement for adopting a child. Some places will have an on-site day-care center, fitness center, credit union on-site. Referral services, if you're looking for day care, elder care, length of service awards, so every five, ten, 15 years there often will be gifts. So just a quick summary. If the employer has a comprehensive program you're really going to have more to think about, more choices to make. And it's really up to you. You have to take some responsibility to make sure you understand that. In you don't understand things, ask questions. Again, that's why the human resources folks, the benefits folks are there to help you. The last hint here is to really review your benefits at least annually as well as when your circumstances change, because if you get married, divorced, those sorts of things, you have different circumstances, and it may dictate that you need to look at your benefits differently, especially when it comes to medical benefits or dental coverage, it really depends. So read what your employer sends you, and I understand that that can be really hard because it's pretty boring, a lot of acronyms, but please, try to pay attention to what your employer sends you, and the deadlines. You know, I can't tell you the number of times somebody will come to me and it's too late to make the change. So you need to pay attention to those deadlines. So with that I'm all set. >> CINDY SOBIERAJ: Wow. >> JUDY DeCOURCEY: I did it. I did it. It's before 1:00 here. How do I pass that ball over to you, Joe? Where did it go? I got it. >> CINDY SOBIERAJ: Thank you, Judy. I hope everyone in the audience has learned a lot, or they're overwhelmed. I'm sure they're not sleeping. >> JUDY DeCOURCEY: (laughter) I hope not. It's still sunny here, by the way. >> CINDY SOBIERAJ: We have a few moments, if you have any questions please submit them in the chat box. >> We have one or two -- >> CINDY SOBIERAJ: One just came in. I am in the interview process with a startup. Still in stealth mode. So we respect your privacy, with unknown funding when and how should I ask about benefits? >> JUDY DeCOURCEY: That's a great question. What I would do there is first check that employer's Web site to see if they have information. Sometimes employers do. What I have found is that universities often have all their benefits information out kind of in the public domain. Private employers not so much. You know, in that first interview you don't want to ask about benefits, but if it's starting to get kind of serious I think it's okay to ask about that, or maybe they have a brochure. For instance, here we have a pretty basic brochure that we give folks. So, you know, you have to -- it depends on how you're feeling about the interview too, and the people. But I think it's okay to ask about those things at least after that -- you know, after you've gone through one or two interviews for sure. >> CINDY SOBIERAJ: Any additional questions? Judy, someone made a comment about the percentage of contribution to -- >> JUDY DeCOURCEY: Oh, yeah, I saw -- I saw that float through. >> CINDY SOBIERAJ: Is there a baseline or is there an average? Is there some -- >> JUDY DeCOURCEY: Yeah, that's good question, or comment, actually. The first thing is contribute as much as you need to get the match. That's -- that's the first thing. If you have a match available, contribute at least that amount. And think about how you can increase it, because the more you contribute now, the more you're going to have when you're retired. And so, you know, I'd hate to put out an average or what the right number is because it's different for every person. So I go back to contribute as much as you can. Increase it every year. >> CINDY SOBIERAJ: You can decrease it too -- >> JUDY DeCOURCEY: You can, your employer -- always you want to understand what the employer rules on. You know, years ago employers had pretty strict rules because of the administration, but so many employers nowadays I think have better systems to accommodate that. So if your employer lets you change whenever you want to, that gives you that flexibility to increase and then decrease it if necessary. >> CINDY SOBIERAJ: That makes sense. >> JUDY DeCOURCEY: That was a good point, though. Another question? >> CINDY SOBIERAJ: Could you combine -- why is there a period for health coverage? What happens if there is a change that occurs outside of a period? >> JUDY DeCOURCEY: Well, that's really when you would do that midyear change. So, for instance, during open enrollment period or as a new hire you sign up for individual coverage. If you get married, then within 31 days, typically, then you can add that new spouse to your coverage, for instance, or cancel your coverage. But it a really -- there are a couple reasons. One, from the insurance company's perspective, they don't want people to just sign up for coverage when they're sick. So I don't have anything wrong with me, I'm not going to spend those $100 a month on my coverage. Oh, now I need to go to the doctor. I'm going to join the plan. So we don't want to see that kind of thing. And then the IRS makes its rules because of the pretax. You know, they're not getting taxes so that's why they sent these rules about when you can and cannot make changes. >> CINDY SOBIERAJ: So check with your human resources benefits professionals to get information specific to your organization. We're getting some