Understanding and Managing Job Benefits

Embrace Your Job Benefits

• Take advantage of company benefits and policies that can directly improve your bottom line. Review your employee handbook to learn about available benefits.
• Health insurance, of course, is extremely important.
• The ability to telecommute or work a four-day work week can save money on both gasoline and auto wear and tear.
• Other valuable benefits include paid holidays and vacation time, pension and profit-sharing contributions, 401(k) matches, life and disability insurance, and tuition reimbursement.
• Some employers provide fitness club memberships, group legal coverage, financial assistance for adoption costs, and wellness benefits such as immunizations and cholesterol testing. Other employee benefits may include “concierge” or errand services (dry cleaning, car washing, and the like), financial counseling, employee discounts, sick-child care, and stock options.
• Many employee benefits are tax free to employees and tax deductible to employers. An employer’s cost for providing benefits to workers often averages around 30 percent of a worker’s salary.

Consider a Flexible Spending Account (FSA)

• Consider opening a flexible spending account (FSA) if one is provided by your employer. FSAs allow workers to pay for health-care or child-care expenses with pretax dollars.
• Money to fund an FSA is gradually deducted from a worker’s paycheck throughout the year, but the full amount is available to use starting in January.
• Money not spent by year-end is retained by the employer. In other words, “use it or lose it.” Workers have until March 15 of the year after contributions are made to use up their balance.
• To help spend down FSA health-care contributions, non-prescription medications such as aspirin and cold remedies qualify for FSA reimbursement.

Understand Stock Options

• Understand how stock options work and how they can build wealth. An “option” is a contract to buy or sell an investment at a future date at a specified price.
• Here is a simple example of options at work: your employer, ABC Company, offers stock options, and its stock is currently valued at $20 a share. The stock option price is set at $30 per share. Workers are given options to purchase 100 shares to reward their efforts to make ABC increasingly profitable. Over time, the value of the stock shares increases to $40. Employees may then want to “exercise their options” and purchase shares valued at $40 per share for $30.
• The gain, when stock options are exercised, is taxable as ordinary income.