How to Calculate the Value of Your Benefits

September 26, 2016

Are you overlooking the real value of your benefits when you think about your compensation? According to the Bureau of Labor Statistics, benefits accounted for 31.4 percent of employer paid compensation for U.S. workers  in June 2016, with salary making up the other 68.6 percent. It’s “open enrollment” season, the time of year when employees make decisions about their health insurance and other employee benefits for the upcoming year. While you’re weighing your options, it’s a good time to practice some benefits appreciation.  One way to do this is to estimate how much the benefits you choose are worth to you:

Health Insurance (typically $5,000 – $30,000)  – Your health insurance is a significant component of your benefits.  How can you value what your employer contributes for you and your family, as well as the discount you receive on coverage for participating in a large group plan? According to the 2016 Milliman Medical Index, the cost of healthcare for a typical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan is $25,826, with employers typically picking up 57% of the cost. That means that participation in their company sponsored health care plan is worth at least $14,721 for that typical family at the typical employer. Of course your insurance costs may be different, and your  employer may subsidize more or less of that.

More and more employers are also offering high deductible health plans in conjunction with a health savings account (HSA). In many cases, they’re contributing to the employee’s HSA as well. HSAs are a widely misunderstood and underrated benefit, and if you fully utilize your HSA, the long term tax advantages can be a benefit to you in retirement.

Retirement Plan (typically 3-6 percent of your salary in matching contributions) – While companies aren’t required to make matching contributions to what employees save for retirement, most companies with employer-sponsored 401(k) plans are offering this benefit. According to the Society for Human Resource Management (SHRM), 42% match employee contributions dollar for dollar up to a certain amount. 56 percent of companies require workers to save 6 percent or more in order to receive the full employer-matching contribution.

There’s also the value of having an employer-sponsored retirement plan in the first place. If you don’t have one as an employee, you won’t be able to save as much for retirement in tax-advantaged accounts. The consequence: employees without a work-sponsored retirement plan are far less likely to save for retirement. In fact, according to the National Institute on Retirement Security, 45% of working age households in the U.S. have zero retirement account savings.

Stock Purchase Plan (typically 10 to 15 percent of market value per share purchased) – In a typical stock purchase plan, the employer offers employees the opportunity, but not the  obligation, to purchase publicly traded company stock at a discount from the market value.

Disability Insurance ($2,000 to $5,000 per year) – Premiums for insurance that replaces a portion of your income if you can’t work due to a non-work related illness or injury can be paid for by the employer, employee or both. Purchasing this insurance as individual policies would be quite expensive. Group policies are much less expense per covered employee, so even if you’re paying some or all of the premiums yourself, you’re getting a good deal. That is if you have access at all. According to the Bureau of Labor statistics only 25 percent of U.S. employees have access to both short and long term disability insurance benefits through their employer.

Life Insurance ($250 to $500 per year) – Many large employers cover their employees with term life insurance at one times their annual salary. Supplemental term coverage is often available for a low, additional cost.

Employer Contribution to FICA (7.65 percent of salary) – What is FICA and why does it get so much money from my paycheck?! FICA stands for Federal Insurance Contribution Act, e.g., Social Security and Medicare, and your employer pays just as much as you do towards both programs.  The employer contribution adds up to total of 7.65 percent of your salary and bonus. When you are retired and draw Social Security and utilize Medicare for health insurance, know that your employers were partners in getting you there.

Unemployment Insurance (0.3 – 1.5 percent of salary) – Under the Federal Unemployment Tax Act (FUTA), employers pay your unemployment insurance, not you, as well as most states. If you lose your job through no fault of your own, and you meet your state’s requirements, you can file for unemployment benefits for some period of time (which varies by state). Like all types of catastrophic insurance, you hope you won’t have to file a claim – but it’s comforting to know that it’s there if you need it.

Other great benefits –  Your company may offer other benefits such as tuition reimbursement, pre-paid legal assistance, commuter benefits, health and wellness programs, access to group long term care insurance, etc. Before you make decisions during open enrollment, check and see if your company has a workplace financial wellness program. That is the benefit which helps you understand all your other benefits.

Do you have a question about workplace benefits? Please email me at [email protected]. You can also follow me on Twitter @cynthiameyer_FF.