Welcome everybody to another edition of the sandwich bread podcast. I'm your host, Tom Kaminski.

And with this special edition, we're going to be diving into open enrollment season planning. Not everybody's open enrollment season comes in the fall, but most, most are in October and November. do get some, probably 10 % of our clients are in June, July, right around that timeframe, So we're going to dedicate this episode to thinking through the open enrollment elections you can make.

And it's a really important part of your financial plan, sneaky way that you can make or save or lose thousands of dollars each fall. So we just want to highlight critical areas of the open enrollment options at your disposal and how we think about them related to the planning work we do for our clients. If possible, we try to reach out to every client of ours and go through their open enrollment elections each year. We use that to of anchor our fall meeting process because it is so important to how we can design the whole year from a tax benefit standpoint. So let's dive in. 

First and foremost, I want to start with perhaps the most important part of your open enrollment elections, and that is your retirement plan. If you have an employer who offers a 401k or 403b plan, this is an opportunity for you to set your deferral for the upcoming year. Most plans offer in season election changes, so as life changes and winds and weaves throughout the year, can jump into your portal, change your elections, deferral amounts, Roth versus pre-tax. But in the fall is an opportunity for you usually to elect to enroll in the plan, set your deferral for the forthcoming year, and also gain an understanding of what employer match or profit sharing they may offer for the forthcoming year. If you're new to the workforce, my simple advice is enroll in your 401k plan or 403b plan.

Get that employer match. That's a really simple starting point. Defer up until the amount that they'll match into the plan. And that's sort of your 1.0 step to take. Anything beyond that is really customized to your unique situation and circumstances. But just as a starting point, click the button, enroll in the plan, and start saving toward your retirement. If you're already in the workforce, I use this opportunity to review any match changes that the employer may be modifying for the forthcoming year.

And it's also an opportunity to log into your 401k plan or 403b plan and just make sure everything is getting invested as you wish. Sometimes you make your elections and they aren't actually being invested into the allocations you've selected. Or sometimes the investment elections have changed. Those are supposed to be changing on a regular basis as your advisor evaluates the options in the marketplace and may select a new product. So just once a year, log in there at minimum and review all your options, ensure the money you're putting in there is getting invested properly, ensure your employer match is going in there properly. There can be record-keeping errors that take place there. that's my simple call to action for the first component of your open enrollment season. 

Second is health insurance. This is, there is no uniform advice for what you should do for health insurance. So if you read something online that says always do this or always do that, be very skeptical of it because everyone's health circumstances are super unique. Coverages for your unique health needs can vary even within the same provider, insurance provider. And every year looks a little bit different. So choosing which health plan is deeply personal.

But I will say, here's a couple of things we do to at least start to dissect your options at a high level. First thing we do is quite simple. Figure out how much in premiums you're gonna pay for the different plans that you have at your disposal. So if you have a high deductible health plan, you'll take that premium amount, match it up with your circumstances, whether you have a couple or a couple and children or you're a single enrollee, take the premiums that will come out of each paycheck and multiply it times the number of paychecks. So if you're 24 or 26 paychecks in a year, take that 50 bucks a paycheck, multiply it times those number of paychecks in a year, and understand what the premium expense is. Then repeat that exercise for the other plans at your disposal. And you'll see when you go through this really simple exercise the difference in premiums you're paying for the health plan you are selecting.

Now, this is not the only thing you should base your decision on, but it can be very illuminating for when you realize that your high deductible plan is actually five, six, $7,000 less in premiums than a PPO plan or an HMO plan that you might have access to. It helps you understand that you're actually starting the year off several thousand dollars ahead or behind depending on the plan you select. Does that mean you should base the decision on that? Absolutely not. You need to then start thinking about what your health needs are going to look like for the next year. This is obviously very tricky to do, but if you're young, healthy, and really just do your basic preventative care each year, there's a good chance the high deductible plan is going to be the winner in terms of total savings. Because you go to those couple of appointments a year, you pay the fees for those appointments, and sometimes they're just covered, they're free. Suddenly you're just saving the difference in premiums.

Another thing you need to do is look at the deductible associated with the plan. some plans, you know, an H a high deductible plan might be five, six, $7,000 deductible threshold. Whereas a PPL plan might be two or 3000 until you hit the deductible. So I try to line up, you know, the first, first row is the premium payments. Next row is I try to understand where the deductibles at and you can see you know, the difference in premiums and the difference in deductibles can help, help you understand, you know, even if you do need healthcare and you want to plan for a hospital event that was not expected, or if you're going to have a child, you can kind of see where those major medical events can push you up to that deductible threshold. And again, compare that versus the premium savings beyond the deductible though, you want to understand the co-insurance. So you hit that deductible and essentially the self-funding of your insurance shifts to a shared funding process where you and the insurance carrier work together to cover that cost up until the out-of-pocket max. So again, you want to understand, sometimes I'll see coinsurance rates be about the same between the PPO and the high deductible plan. And so we really just need to understand how soon are we going to hit that deductible before it looks very similar. And then you look at the out-of-pocket max and often those are fairly close as well. So if you're expecting a major expense year for health again that high deductible plan might be compelling if the out-of-pocket max You know, you're gonna hit looks pretty similar for both plans Again, once you understand the math of it You really need to take a look at your own unique health needs You need to review the insurers, you know, what is covered? Contact your primary care physician your specialists and ensure the plan you're gonna select will match the health needs and your preferred care. this is really difficult. And what I just try to do with my clients is work through the math of the decision and then have a bigger dialogue around healthcare needs. Try to match the plan to your needs. 

Now, one of the added benefits of a high deductible plan that every financial planner loves is that often they come paired with a health savings account, AKA an HSA. this is awesome because there's many tax benefits to it, but essentially you're getting a pre-tax deduction for a pre-tax contribution of money into the HSA account. If you invest those, those proceeds inside of the account, they grow tax free. And then if you distribute them for qualified medical expenses, that distribution is tax free. So it's really more powerful than a traditional IRA or a Roth IRA because you get the benefits, the tax benefits of both account types in one singular account.

I save that for the end because I don't want clients to make a decision solely based on the HSA. But if the math looks pretty close when you compare the plans at your disposal and one has an HSA and the other doesn't, the choice becomes pretty clear. You get this nice tax deduction. At times your employer will put a match into the HSA account as well. That's again, basically free money into the account. And the ability to invest it and save it for the long-term is super powerful. My clients...aren't in a savings pinch, if they have adequate cash savings, I always recommend keep the money in the HSA, let it compound and grow. And for younger individuals, that's a way of really financing your long-term care needs in retirement. So an awesome, awesome account that I love to feature and highlight with my clients. And honestly, for high-income W-2 individuals, there aren't a ton of those above-the-line deductions, so it's a really nice tax perk as well.

Tough one, I know that was a little long winded, it can be really complex, but I hope I highlighted just some of the ways we think through the analysis side of it.

Okay, so now that we've worked through the complicated health care decision tree, let's talk for a minute about flex spending accounts. They're related to the health care decision. There's a couple of different flex spending accounts that you may use if it's appropriate for your circumstances. First and foremost, healthcare FSA or healthcare flex spending account. This one is paired with a PPO plan and you can defer up to $3,400 per person in 2026. these contributions are pre-tax and they can be used for a wide range of purposes, copays, deductibles, coinsurance, doctor's visits, hospital stays, medical supplies, prescriptions, the list goes on. So it's a really powerful account to offset the added cost of your healthcare expenses that are accompanied the PPO plan. I love this, but one of the most important things to remember with this is it is use it or lose it. So this is different than the HSA account I mentioned before. You put money into this, you essentially have to deplete the account in a predetermined period of time, which can, there can be some forgiveness into the next tax year.

And now they're starting to allow small amounts of rollover benefit into a subsequent year. But largely, if you put money into it, do so with the expectation that you'll need to deplete it during the next year. But it's another way of putting some pre-tax dollars aside. And that's all to say, if you don't think you'll have much in the way of healthcare expenses in an upcoming year, be conservative with the amount you put in there because you want it to match up and you don't want to lose that money.

So after the healthcare FSA, let's talk for a minute about the limited purpose FSA. Unlike the healthcare FSA, which pairs with the PPO, the limited purpose FSA pairs with your high deductible health plan, but it is limited as the title says. It's more narrow in scope. You're using it for dental and vision needs primarily. And so if you're going to get a major oral surgery that you're certain will happen, or if you want to pursue LASIK, surgery, something to that effect, So if you're putting money into it, operate with the assumption that you'll take money out of it during the course of that calendar year. So please take time to read the fine print on what is a qualified expense and don't contribute more to it than you know you'll spend during the upcoming year.

Last but not least is the dependent care FSA. This one is not healthcare related, but it's a different type of flex spending account where you can use pre-tax dollars to pay for care for your dependents. Now, a lot of fine print related to this one, so be sure to look into it carefully before you set up this account, put money into it. But essentially the spirit of this account type is to allow two parents to work.

The idea is you've got two active parents that are in the workforce or pursuing the workforce and you have children or dependents that you need to care for simultaneously. And for those of us that are familiar with this, it's super expensive to do daycare, nursery school, afterschool camps. The list goes on super expensive, a major budget item, usually you know, if you have multiple kids, more than your mortgage. And this account type will allow you to put either $5,000 or $7,500 pre-tax into it for calendar year 2026. Most are $7,500, but there's some discrimination testing that can come into play. But it's pre-tax dollars into the account. So, you know, for those high income earners, it is another good tax deduction. And those funds will are then distributed to help pay for these camps.

Again, there is a lot of fine print around this, you know, if you've got daycare, qualified daycare expenses, that's an easy one. Summer camps work. Weirdly, non-overnight camps are one of the particulars around that. So summer camps or afterschool programs. But again, use it lose it. So the money you put into it, you want to make sure you get out of it, which if you've got a kid in daycare, five grand or 7,500 goes super fast, but it's very powerful. There's not a lot of things out there that help us with these immense childcare costs. This is one of those nice things that exists. Don't sleep on it, don't overlook it. Take a minute to review the terms and conditions associated with it. A lot of fine print with this one, so make sure you qualify.

Okay, next up, short-term disability. Very helpful to understand what your employer provides. I don't often see if an employer does provide short-term disability. I don't see any type of additional paid-up benefit, but you just need to know if you become disabled for a period of time, what is the coverage, what's the process, and compare that versus your take-home pay. Just understand, if you don't have sufficient cash savings, there's going to be a shortfall during this window of time and it could be really stressful for your family. So I always encourage my clients understand what your short-term disability is and then build up a cash savings or an emergency fund that can complement this and just make sure your family is okay as you transition back to the workforce. If unfortunately you need to transition to more of a long-term disability, this is perhaps the most under the radar but impactful benefit that your employer provides.

Long-term disability replaces your income usually until age 65, but you need to read the fine print because there can be different structures to the insurance. But it goes to cover a percentage of your income if you become disabled for a long period of time.

Huge benefit because the statistic is that those entering the workforce in their 20s that work till their 60s, about 25 % of the time an individual will actually get into long-term disability. So it's a benefit that is fairly widely used and It's critical to have it in place. You appreciate how valuable this benefit is when you're in the role of financial planner and you go and quote long-term disability policies for your clients that don't have this coverage you see thousands in premiums that your employer is quietly paying on your behalf. And now I'm having to shop independent policies for my clients to try to fill this gap if there is a gap that exists. again, ensure your employer offers long-term disability. And if there's an opportunity to pay up, or go from 60 % to 66 % of your income, look carefully at doing that. If you think, you you sketch it out, you think your family can't sustain 60 % or 50 % of income replacement, try to pay up a little bit if you can afford it to get that extra coverage. It's hugely powerful. It's hugely beneficial for your family.

Couple of little things related to long-term disability. Understand what your covered compensation is. So if you are in sales and you make your base salary $60,000 or $100,000 a year, but you make $200,000, $300,000 a year in sales commissions, your employer is going to base long-term disability often on covered compensation. Understand what that is? Because if it's just your base salary, suddenly you're getting 60 % coverage on $100,000, but your take-home pay may be $300,000, $400,000, $500,000 a year. Pretty wide gap there and you just want to make sure your expenses can sustain that type of coverage.

One other thing, understand if the premiums you're paying for long-term disability are after-tax or pre-tax. Preferably these premiums, in my view, are after-tax because then your benefit that you receive if you become disabled is after-tax as well. It's essentially a tax-free benefit. pre-tax, then the payment, if you become disabled, is taxable. Big one there, don't sleep on that. That is one I am really careful to look at for every client and make sure we've got coverage there. 

Next up is life insurance. Review your employer benefits, understand the life insurance coverage you get. Often there will be somewhere between one and three times your income. Again, covered compensation. So make sure you understand what the coverage actually is. Offered for free, which is a wonderful benefit for your family in the horrible event that you pass away. so understand what your coverage is. And, ⁓ this is where, you know, life insurance ⁓ is not a simple conversation and there's layers to it, which is why most people avoid the subject, but it's super important. If you pass away, you want to make sure your family is taken care of. Your family goals are taken care of. and so what I usually recommend for my clients, we understand what their employer benefits are.

And, we want to analyze the added cost of doing paid up insurance through work. Often what I find is if you shop an independent policy, you've got lower premiums, depending on your health, of course, and there's portability. So you can take that policy with you as you switch jobs. I tend to find a superior insurance experience through an independent policy, but if it's not a fit for your situation, then you want to pay up through work and make sure it's sufficient to cover your family needs. The calculations around that are a little bit complicated, you essentially want to make sure your goals are covered and understand if both spouses are working, you just want to know relative to your spending, how much of a gap there is if one or both passed away. So there's a little bit of work to do there, but I always recommend, if you're reaching out to somebody who sells life insurance, usually it's a friend or a family member. Just understand their motives, understand their incentive structure, and you want to try to work with somebody who has your best interest in mind.

So it can be a little bit difficult. I'm biased. You know, as a fee only financial planner, I don't accept commissions for the insurance I recommend for clients. and I have great collaborative relationships with insurance brokers who do their best for my clients. So just try to get yourself, put yourself in a situation where you understand the incentive structure. It's really clear what the benefits are to the person that's recommending a policy to you. It's not the end of the world. If somebody accepts the commission, just understand what their incentives are.

All right, now let's jump into pet insurance. It's crazy how expensive healthcare for your pet has become. I'm going to link in the show to a recent episode of, I think it was planet money where they dove into these rising costs. It's wild. ⁓ so I am pressing every client who has a pet to at least look at pet insurance if offered through their work, if there's some type of discount to procure it, because simple procedures for pets are now thousands and thousands of dollars. And so paying a little bit in premiums each year for a set of knowns that might help defray the cost is huge. Also, just be aware, most pet insurance does not cover pre-existing conditions.

Like the last thing you need is another policy review exercise, but I recommend it. It's so important. It can save you enormous sums of money if you need need medical procedures for your pet.

Next up, identity theft protection. If your employer is offering a discount to one of the major providers of identity theft protection, I recommend getting it. Having your identity stolen can be so expensive and this is a way of ⁓ getting in the middle of that before it becomes a huge problem. So I recommend it regardless of whether your employer offers it or not, but sometimes they have nice discounts to offset some of that cost.

I hope that this episode is helpful to share with you the ways we think about all the key components of open enrollment season and how we help our clients get the very most out of their employer benefits. If you have any questions or any thoughts, please feel free to reach out to me, tom at twinrobbins.com, and I'm happy to have a dialogue with you around this. We'll try to do this every year. So as new benefits roll out or things change over time, we'll try to do another episode and offer some new thoughts.

So thank you so much for tuning in and we'll catch you again soon.