Most employers offer a number of benefit options as part of their overall compensation package. Many of these options provide insurance and other benefits at much lower costs than what you would have to pay individually. Be sure to review your options and take advantage of the ones that are right for you.

Retirement Plans

Most large companies offer some form of retirement plan. 401(k) plans have become very popular because they provide the employer some flexibility and offer the employees the chance to defer part of their wages. Most plans also have some form of an employer “match” that helps balances grow even faster. Amounts contributed grow on a tax-deferred basis and you can take distributions when you retire or change jobs.

Be sure to review your plan carefully. If at all possible, at least contribute enough to get the maximum match from your employer. Contribute more if you can. Make sure you choose investments that match your investment objectives. If employer stock is one of your investment options, consider the risks and practice diversification.

Health Insurance

Everyone should have health insurance and you are lucky if coverage is available through your workplace. The cost of group health insurance available at work is usually much lower than what it is on an individual basis. In addition, many employee group plans have fewer “pre-existing condition” exclusions. While many employers require some participation from employees, company-offered health insurance is usually a bargain as long as you can get the coverage you want.

Be sure to understand the type of plan being offered. “Fee for service” plans usually allow you to choose any physician you want, but often have higher deductibles and higher costs. There is also usually a “co-payment” provision that makes you pay a percentage of the costs (up to a limit) after you have met the deductible. “Managed care” plans are usually associated with a health maintenance organization (HMO) or preferred provider organization (PPO). Managed care plans usually have more restrictions but are cheaper and often have lower co-payment and deductible provisions.

Choosing the health insurance options at work should be based on how you want to use the insurance and how much you can afford. If you view insurance as simply protection against very large medical expenses, choosing a higher deductible will probably result in lower premiums.

If you are leaving a position, be sure to ask about extended health insurance coverage. It may be available from through the employer or through some other type of plan. These plans are usually much cheaper than individual plans.

Flexible Spending Accounts

A flexible spending account or “Cafeteria Plan” allows you to direct a portion of your wages to cover reimbursement for dependent care and unreimbursed medical costs. The big benefit is that you are able to use “pre-tax” dollars to cover these expenses instead of paying them with funds that have already been reduced by income taxes.

The (potential) negative of Cafeteria Plans is that once you defer the wages into the plan, you can’t get them back if you don’t use them. It is “use them or lose them.” Therefore, before enrolling in a Cafeteria Plan, be sure to think seriously about the level of qualifying expenses you may have. Consider childcare, elderly care and medical costs not covered by your plan (including deductibles and co-payments).

Be sure to talk with your human resources department to get a complete understanding of how your Cafeteria Plan works. These plans are a great way to cover certain types of expected costs with “pre-taxed” dollars. For someone in a 25% tax bracket, that is the same as getting a 25% discount.

Other Types of Benefits

Many employers offer short-term and long-term disability insurance coverage. Again, because this insurance is available as part of a group, the costs are usually lower than what you would spend on your own.

Some companies offer other types of “savings” or “thrift” plans that enable you to save money conveniently and regularly. Stock purchase plans may be coupled with some discount when buying company stock. Be sure to consider how owning your employer’s stock may fit into your overall financial or retirement planning.