How can you help employees maximize their benefits choices?

Steep health care cost increases, the steady elimination of retiree health benefits, and a greater need to save and invest more for retirement makes it even more important for employees to make smart benefits choices. To help employees maximize their benefit options, Hewitt Associates suggests that employees be kept informed and look at their benefit choices holistically so they can make better decisions about their health and financial futures.

To get the most value from their benefit plans, Hewitt Associates suggests that employers pass the following tips on to their employees:

1. Give yourself enough time. Given the impact benefits can have on overall quality of life, employees owe it to themselves to seriously evaluate all of their options. Employees should be encouraged to conduct both long- and short-term assessments. Employers should ensure that employees understand the entire spectrum of benefit options that are available to them.

2. Do your homework. Employees' benefit choices not only impact their pocketbooks, but also their family's overall well-being. In some cases, employees might find several ways to cut costs and still receive the level of care that they require.

3. Consider changes. Employers should keep all employees informed of any updates, changes, or new offerings that affect the benefits program at a particular organization. Chances are good that benefit options previously selected by an employee have changed. For example, new consumer-driven health plans allow employees to choose how to spend their health care dollars, depending on their risk tolerance and personal needs.

4. Use available tools. Employees should be aware of any online resources you provide them for the purpose of estimating their benefit needs. According to Hewitt research, nearly all employers offer health care cost estimators and more than 90 percent offer investment education services. Employees who use these tools can gain greater confidence that they are selecting the best benefits options for their individual situation. However, in order to benefit from this resource, they must first know about it.

5. Read the fine print. More employers are changing the rules of the annual enrollment process, and it's up to employees to make sure they fully understand if and how those rules may affect them.

6. Consider a health account. If you offer Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs) or Flexible Spending Accounts (FSAs), encourage employees to take advantage of them. Inform employees that health accounts will allow them to save and pay for health care expenses on a tax-advantaged basis and can also be useful vehicles to help them save for future health care expenses.

7. Use open enrollment as a yearly financial checkup. The annual open enrollment period is a great time for employees to give their 401(k) plan a comprehensive examination and to get on the right road to retirement. Employees should be encouraged to use enrollment season as an excuse to review their plans and to take advantage of new features that might be available, including contribution escalation, lifestyle funds and automatic rebalancing.

8. Think about the long-term. Employees should be encouraged to think about the long-term impact of what may seem like a small decision today. Today's needs seem so immediate, but saving even a little bit more today can have a huge impact at retirement. For example, a worker age 30 earning $40,000 a year who contributes six percent of his salary to a 401(k) plan will have approximately $770,000 by the time he retires (assuming a seven percent annual rate of return and a company match of three percent). If that same worker increases his contribution level to eight percent-just two percent more-he is projected to have about $940,000, or $170,000 more by retirement age.