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Job Benefits

Coordinating benefits for working couples

If you and your spouse work for separate employers, you should coordinate your benefit selections to optimize protection at the lowest cost.

Compare company health plans

Coverage differs substantially from company to company:

* If each employer offers noncontributory coverage-that is, if it doesn't cost you a thing-then obviously keep both health plans.

* If one or both plans requires you to pay for coverage, choose one plan. A noncontributory plan may not be the cheapest if it has high deductibles and lots of exclusions that you must pay for out of pocket. In assessing cost, take into account deductibles, required co-payments and the extent of coverage.

Regardless of cost, make sure the coverage is the kind you want. For example, make sure the plan provides the type of maternity care, psychiatric coverage and other benefits you may need.

Example: One employer may provide company-paid HMO coverage, while the other may provide a more flexible company-subsidized plan. If you don't want to use the HMO doctors in your area, then you would opt for the other plan even if you or your spouse will have to pay for some portion.

Other factors: Consider job stability in selecting a health plan. If one spouse anticipates a job change, then the family may be better off with health coverage from the other spouse. Also consider each company's record on health coverage. Some companies routinely make changes or increase costs to the employee. A change can mean a whole new network of doctors or a group you may not prefer.

Compare other benefits

Two-earner couples should assess other benefits too. For instance, some employers now provide home computers and cell phones as a benefit. If a couple needs only one of these items, don't accept both. Instead negotiate for other benefits, such as extra time off.

Don't duplicate automatic coverage

If your company automatically pays for a particular benefit-for example, dependent care assistance-then your spouse should not select this coverage at his or her company. He should instead opt for other benefits, such as additional life insurance.

Negotiating Tips for Job Hunters

When the job market is tight, qualified individuals can negotiate better compensation packages. Here are ways to get the best deal:

* Signing bonuses. They're not just for star athletes. If you're going to change jobs, ask for a cash payment up front. Aim for a cash replacement of what you're giving up-years of vesting in a qualified retirement plan, special perks of the old job (such as built-up vacation time), a year-end bonus.

Example: If your old job gave you four weeks of paid vacation and now you'll have to start building from two weeks, include compensation for those two lost weeks.

* Vacation time. Companies have firm policies that relate vacation time to seniority. But it doesn't hurt to ask if you can get the same number of weeks you had before.

* Relocation assistance. If you'll have to move to take a new position, ask that your new employer foot the bill.

"A good workman is never overpaid."
-Proverbs


Employers are under no legal or moral obligation to offer benefits, but many do as a means of attracting and keeping good employees. When the company bears the cost of medical coverage, retirement savings and other benefits, you are relieved of these burdens and can put your money to work elsewhere. Many employee benefits, called fringe benefits or perquisites (perks), are tax free.

Today, employee benefits can make up a nice chunk of a compensation package. Your employer may be able to obtain these benefits at better prices than you would be able to command.

How employee benefits save you money

When a company pays for a benefit on your behalf, you save substantially. You don't have to come up with cash to pay for the benefit on your own. Depending on the item, this may free up more than just the cost of the benefit since you would have to cover the expense with after-tax dollars.

Example: Assume you were in the 28% tax bracket. If you wanted to pay for life insurance, a nondeductible personal expense, and the premiums were $1,000 a year, you would have to earn about $1,400 to have the $1,000 after taxes to cover the premiums.

There's an added benefit to company-paid expenses. Often the company can command lower prices than you would have to pay for the same benefit.

Example: The company can provide group term coverage at substantially lower premiums than individual term coverage, with the same death benefit.

Even if the employer-paid benefit is taxable to you, it's still a big money saver. Your cost is limited to the tax on the value of the benefit.

Example: Assume you're in the 28% tax bracket. If your company pays for financial planning, a taxable benefit, and you avail yourself of $1,000 in assistance, your cost for receiving this benefit is only $280 ($1,000 x 28%).

Some benefits may be exempt from income tax but still subject to employment taxes, including Social Security and Medicare taxes. If so, then your cost for these benefits can be no more than 7.65% of the value of the benefits.

Strategy: If you can afford it, negotiate for employer-paid benefits in lieu of increased compensation, such as an annual pay raise. The company would not pay any more than the compensation it already agreed to pay, but you'll benefit on an after-tax basis.