Annual update reminders – what you should be doing now

It’s a good practice for employees to review certain personal and benefits information annually and, for a variety of reasons, it makes sense to look at it in the fall.  Employers that encourage this annual review process experience fewer employee change requests a little too late, ultimately saving managers and employees time and avoidable frustration.

Consider creating an all-staff calendar event in late October or early November each year to ensure employee information is updated going into the new year.

Personal Changes

If employees experienced any personal changes during the year, such as a change in address or marital status, they should:

• Update their address information now, before W2s are issued
• Update their emergency contact information
• Update beneficiary information on their life insurance policy, Retirement Savings Plan and Health Savings Account.

HSAs and FSAs

Pre-tax savings accounts, such as Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs), are subject to annual contribution limits set to the calendar year.  If you offer either (or both) of these tax-advantaged benefits, their contributions will likely end on December 31^st unless they actively re-enroll. Other considerations as the calendar year ends:

FSAs

• Employees enrolled in an FSA should be reminded to spend all their funds by December 31^st to avoid forfeiting any unused funds. With most FSAs, participants have 90 days after the year ends to submit claims for reimbursement, but typically the expenses must have occurred no later than December 31^st to be eligible for reimbursement.  Confirming the plan parameters with employees around this time of year minimizes confusion about claims and reimbursement deadlines.
• Remember that in 2020, certain over-the-counter medications and menstrual products became eligible for reimbursement. Distributing a list of FSA-eligible over-the-counter products is a great way to encourage employees to use up any remaining FSA balance before the end of the year.
• The IRS generally publishes the limits for the next calendar year around mid-October. Provide employees with the annual contribution limit for the next year and encourage them to make the most of their tax savings by considering any new annual contribution limits while taking their family’s upcoming eligible expenses into account.

HSAs

• One of the greatest benefits of an HSA is that the funds are not forfeited if left unused by the end of each calendar year. To increase utilization of this benefit, remind eligible employees that funds rollover from year to year and that they can continue to use HSA funds tax-free for eligible expenses, even if they change employers or benefit plans.
• As with FSAs, the IRS generally publishes limits for the next calendar year around mid-October. Provide employees with any increase to the IRS-set annual contribution limit.

Retirement Accounts

Employer-sponsored retirement savings plans, such as 401k, 403b, SIMPLE IRA, etc., are often referred to as ‘set it and forget it’ which means that once the employee enrolls their payroll deductions will continue from year to year without any action necessary unless they actively make a change.  While having one less thing to remember may seem like a good thing, there are things employees may want to consider each year.

• If your organization provides a matching contribution, encourage employees to contribute at least the amount of your employer match. For example, if your employer contribution is a dollar-for-dollar match up to the first 2% the employee defers into the plan, the employee could be encouraged to defer at least 2% for a total of 4% of their qualified earnings to be deposited into their retirement account.
• Encourage employees to invest in themselves. A good practice is for participants to increase their own contributions into the plan by 1% annually.  This method allows employees to acclimate to the change in net pay while prioritizing their retirement savings.
• Some employees contribute the maximum limit each year. Provide employees with any increase in the IRS-set annual contribution limits for next year and encourage them to submit a change to reflect the additional allowed contribution.  The additional $500 – $1,000 added to the annual contribution limit adds up significantly over time.

With these few tips and tricks on your organization’s fall ‘to do’ list, you’ll approach each new year knowing your employee records are current and that they’re making the most of your company-sponsored tax-advantaged benefit plans.

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