PART II: Your Company Benefits Package
Our second article in the What to Expect Financially when you’re Expecting focuses on company benefits. While there are many benefits that could be highlighted, this article will focus on a few of the benefits that we think are important to review in light of the upcoming change of welcoming a new baby to your family. These topics are a review of your dependent care flexible spending account (FSA), Health Savings Account, and considering disability vs. FMLA.
Dependent Care FSA
First, regarding the dependent care FSA, this is a type of account where an employee can contribute on a pre-tax basis (similar to a 401k) and then use these funds to pay for certain eligible dependent care expenses. The maximum amount that someone can contribute to the dependent care FSA in 2019 is $5,000 and this account is a great way to save for future expenses like before or after school programs, etc.
There are some important rules that go along with this type of account such as the “use it or lose it” feature and it is important to know the rules before you move forward to save in this type of account, meaning if it isn’t used by December 31st each year, it is lost for the new year. Nevertheless, this is a great account to take advantage of if you have the option of contributing to one through your employer.
Health Savings Accounts
Second is the Health Savings Account (HSA). This is also a pre-tax account where you can contribute earnings on a pre-tax basis and use these funds in the future for qualified medical expenses. The HSA is one of the most, if not the most tax-efficient account available as you are able to contribute earnings on a pre-tax basis, the funds grow tax-deferred, and if you withdrawal the funds to use them for a qualifying medical expense, they can be taken out tax-free. In 2019 you can contribute up to $3,500 to an HSA if you have single coverage or $7,000 for family coverage.
As with the dependent care FSA, there are some important rules that are associated with the HSA such as the requirement that you have a health insurance policy with a high-deductible and also that you use the funds for qualified medical expenses. If you do have access to an HSA, though, it is a great idea to contribute as much as you can up to the maximum allowed as there will likely be medical expenses associated with doctors’ visits, etc. after the baby is born and the HSA is a great way to account for these expenses.
Short-Term Disability and Family and Medical Leave
Finally, we will consider some of the elements regarding short-term disability coverage and Family and Medical Leave (FMLA) benefits. While there are many aspects that we could highlight, it is important to note that while you may be entitled to having days off from your job when you have your baby, these days off from your job generally will be unpaid. If you do in fact qualify for FMLA, it is generally the case that your employer will require you to take your FMLA leave at the same time as your short-term disability leave. This is where short-term disability coverage can be very helpful as it can help to cover some, but not all, of your wages as you are on maternity leave.
It is important to understand how your short-term disability coverage will work together with FMLA since knowing the details before you need to use the coverage would be very beneficial for planning purposes. Understanding the answers to such questions as: have I worked at my employer long enough to be eligible for leave under the current short-term disability policy, how much income will I receive, and how long will I be able to collect benefits are all important questions to consider. Also, if you can understand the specifics before-hand, this will be one less thing to think about once you have your new baby.
We would recommend speaking to your company Human Resources department to see if there are any aspects to your upcoming leave that you need to know about and consider. There may be other potential benefits that you have access to that will play a central role in determining how to best structure your time away from your job.
In our next installment of the series, we will discuss the different insurance coverages that are important to review as you anticipate your new baby.
If you would like help regarding your financial plan and to prepare for your new financial journey as a parent please reach out to Accruent Wealth Advisors for a complimentary consultation.