Workplace Benefits Explained. 2025 Edition
Starting a new job? Open enrollment time? Understand what's available to you. A guide to workplace benefits, updated for 2025.
Strategically selecting your company benefits can be a good way to save yourself a decent amount of money. Why? Because many of these benefits come from using pre-tax dollars. Paying with pre-tax dollars lowers your taxable income, which in turn will lower your tax bill.
By way of an example: if you are in the 24% Federal tax bracket and 6% state tax bracket and you max out your 401(k) with $23,500 in pre-tax contributions (max for 2025) and your HSA with $4,300 (max for 2025), then you’d be lowering your taxable income by $27,800, which could result in a tax savings of $8,340.
Many companies hold specific windows of open enrollment and – aside from when you first join an employer - it’s often only during one of these windows that you can make changes to your elections outside of a qualifying life event (getting married, having kids, spouse losing a job, divorce, etc.).
Here is a guide to understanding what type of benefits your company be offering and how to choose the best ones for you.
HEALTHCARE
Let’s start off with the big one, medical insurance.
Your medical insurance is likely the biggest ticket item and can definitely present savings opportunities. Selecting the right healthcare plan for you and your family can go a long way to offering the protection you need at a price that works for you.
Here are some of the options you may have.
HDHP + HSA – High-Deductible Health Plan (HDHP) with a Health Savings Account (HSA)
Qualifying High Deductible Health Plans (HDHPs) must set a minimum deductible of $1,650 for an individual or $3,300 for a family in 2025. Annual out-of-pocket maximums, including copays, deductibles, and coinsurance, must also be limited to $8,300 for an individual and $16,600 for family coverage in 2025. Those limits don’t apply to services that are not in-network. You’ll likely need to cover any out-of-network services yourself. The plan will usually indicate either in its name or in its information materials whether it is HSA-eligible.
While out-of-pocket expenses and deductibles are higher with HDHPs, these plans have lower monthly premiums. Keep in mind that you must hit the deductible before the plan pays for any covered expenses.
HDHPs Open The Door to HSAs
You must be enrolled in an HSA-eligible HDHP to be able to contribute to an HSA. Not all HDHPs are HSA-eligible so make sure that yours is if you plan to go this route. An HSA is a saving and/or investment account for health-related expenses.
Below are some HSA fun facts.
The maximum contribution for 2025 is $4,300 for an individual or $8,550 for a family. This number includes any company contributions. Depending on the HSA administration/setup, you may be able to automate monthly contributions. So, if your goal is to max out your HSA for 2025, you’re looking at around $358 a month for single coverage.
You can use your HSA to cover most out-of-pocket medical, dental, and vision costs. The CARES Act has helped HSA dollars travel even further than before. For example, you no longer need a prescription to get reimbursed for cold and flu remedies. Using HSA funds for ineligible expenses could stick you with a 10% penalty plus income tax on the distribution. Learn more about eligible and ineligible expenses for HSA funds here.
You will receive a debit card for your HSA to pay for eligible health expenses. Doing so makes it simple to access the money when you’re collecting your prescriptions at the pharmacy or paying your medical professional’s co-pays.
Contributing to an HSA gives you a triple tax benefit. HSAs are extremely powerful from a tax perspective.
Any funds you contribute to your company HSA are pre-tax
Gains grow tax-free, and
Taking the money out for qualified medical expenses is also tax-free
Additionally, unused funds stay in your account, making HSAs a great long-term savings opportunity. This is a common point of confusion for people since Flexible Spending Accounts (FSAs) generally need to be used in the current year and only a balance of $660 or less (2025) can be carried over to the next year, see below.
Using Your HSA like an IRA for Healthcare
A great und under-utilized financial hack is to very efficiently invest the money in your HSA instead of just saving it in cash and use it, not as a medical reimbursement account, but as a powerful retirement tool. This smart financial move is recently gaining momentum as the better financial advisors around are sharing this story with clients. Try to think about an HSA like an IRA investment, not like a piggy bank used to pay medical expenses.
Investing the money exposes your contributions to compound earnings and interest and could help you pay for larger expenses down the road. If you have the cash flow or savings to pay for out of pocket medical expenses now, it’s highly recommended that you contribute to your HSA and invest it so that this money can work harder for you in the future, and not just to pay medical expenses in the present.
I have outlined this strategy in more detail in my article “How To Use a HSA As A Powerful Retirement Planning Tool”
Even if you leave your employer, you get to keep your HSA.
Some companies may even contribute a specific amount to your HSA each year, like a 401(k) match. Some may also offer financial health incentives for completing various health and wellness tasks (like walking challenges, active minutes, etc.) that you can elect to have deposited into your HSA account.
I would especially recommend HDHP/HSA policies for those that are younger, relatively healthy, and don’t anticipate significant health expenses for the year.
PPO – Preferred Provider Organization
When it comes to health plans, you’ve probably noticed them labeled as either PPO or HMO. So, what’s the difference?
PPOs tend to be the more flexible of the two. It’s a type of health plan that contracts with several hospitals, doctors, and specialists, offering consumers broader access to participating providers.
Some key facts:
When you stay within the plan’s network, you pay less.
While you can use out-of-network providers, you’ll likely incur an additional cost.
Most PPOs also allow you to see a specialist of your choice without first consulting with a primary care provider, something HMO plans often require.
PPOs tend to have higher premiums but lower deductibles. As with any health plan, you must hit the deductible before the plan pays for any covered expenses, but since the thresholds are much lower, you may be able to satisfy the requirement quicker.
When does a PPO plan make sense? .. PPOs are often a good fit for people who go to the doctor regularly and anticipate possible significant medical expenses in the upcoming year, e.g. if you are pregnant.
HMO – Health Maintenance Organization
In comparison, an HMO is a group of doctors and hospitals that provide healthcare services for a co-pay rather than deductibles and co-insurance. HMO plans are often less expensive with more competitive premiums and affordable co-pays.
But HMOs do have some drawbacks.
HMOs typically only cover in-network services and will not pay for services provided by out-of-network providers. They might sometimes make an exception for urgent care, but that’s not guaranteed.
Many require a primary care physician to authorize the seeking out of specialist care, though there are some exceptions like mammogram screenings.
When does a HMO plan make sense? .. If you are currently enrolled in an HMO, are happy with your providers, and the plan has competitive premiums, it may not be worth switching. Just remember, the plan will not cover out-of-network visits, so if you are traveling away from your HMO and need to be seen for anything other than an emergency, you may be paying out of pocket.
Healthcare Plans for Self-Employed Workers
Nearly 30% of Americans are self-employed, making obtaining affordable health insurance that much more challenging.
If you work for yourself, you can purchase insurance via the Health Insurance Marketplace. This option is only available for those who don’t have employees, like freelancers, independent contractors, consultants, etc. Healthcare.gov has excellent information and steps to complete an application.
Open enrollment each year begins in early November and runs through mid-December. As with any other health plan, look at the total expenses and your care needs to purchase a policy that’s right for you.
Flexible Spending Account (FSA)
FSAs are another way to save pre-tax dollars to pay for qualified medical expenses. The maximum salary-deferred contribution is $3,300 in 2025, which is lower than the HSA limit. This is the max regardless of whether you’re fiscally single or file your taxes jointly.
FSAs require a bit more financial leg work than HSAs, namely because you can only carry over a maximum balance of $660 (2025) into the following year. So, any unused funds above that amount in the account at the end of the year are simply lost. This is often why FSAs are dubbed“use it or lose it” accounts. Do your best to estimate how much you typically spend on medical costs each year (glasses, contacts, doctor’s visits, etc.) so you don’t overfund the account.
Go to www.fsastore.com for an idea of which items are and are not eligible for your FSA dollars, you may be surprised just how many are! So, spending down the FSA account sometime towards the end of the calendar year to get to a balance of $660 or below before New Year’s Eve shouldn’t be particularly challenging.
Your FSA does not move with you if you change employers.
Generally, you’ll use an FSA in conjunction with a PPO or HMO, whereas you’d save in an HSA in combination with an HDHP.
In general, you will have to choose between funding an HSA or an FSA. If you for qualify for either, you should probably elect to contribute to an HSA. The rollover provision makes the HSA more beneficial than the FSA. (You technically can have both if you use the FSA only for dental and vision costs, but it adds unnecessary complexity unless you know you’re paying for, for example, major dental costs next year).
Dependent Care FSA
Dependent Care FSAs are excellent accounts for those in any kind of caregiving position. They allow you to use your pre-tax dollars to pay for eligible dependent care costs. Caregiving can take on several different forms, from daycare to after school costs, from helping a disabled spouse to caring for an older parent or relative.
The contribution limit per household (married or not) is $5,000 (2025) except if you are married and file separately in which case the limit is $2500. Keep in mind that employers are not necessarily required to adopt this new limit. Check with your HR department to see how they are handling this and if you might be able to increase your contribution if you have high dependent care costs.
Dependent Care FSAs can be quite beneficial for working families with young children. You can use the money for daycare, summer day camps, before or after-school programs, and more, so be sure any programs you’re considering do accept funds from this type of account.
Health Benefits Round-Up
In summary, what are the primary things you should look at when it comes to deciding on your health plan?
Know your ongoing costs like premiums, deductibles, copays, coinsurance, etc., and how they work for each option. Keep in mind that one variable tends to offset the other. A plan with a high premium will likely have a lower deductible and vice versa.
Examine your out-of-pocket maximums—this is where some plans can surprise you. This is especially important if you are expecting a lot of medical expenses for the year, like if you plan to have a newborn baby or have an underlying condition that requires regular medical visits and/or treatment.
Understand your care options. What constitutes in-network? Do you need access to specialists and other professionals? Remember, in-network will always be more affordable, no matter which option you choose.
Be confident in the care you need. How often will you need to see a doctor/specialist? Are you anticipating more medical spending in the next year? Knowing the type of care you need will be instrumental in selecting the right plan.
Keep saving for medical costs along the way. Whether you save via an HSA with a high-deductible plan or an FSA with a PPO or HMO, keep saving for your medical expenses. Working parents should also look at dependent care FSAs to pay for some childcare costs with pre-tax dollars.
Coordinate benefits with your spouse. If you’re married and your spouse also has company benefits you’ll want to compare these plans to see which one is the best fit for you as a couple or family. Sometimes it makes sense for you to each be on your own plan through your employers.
INSURANCES
Long-Term Disability Insurance
Your ability to earn an income is likely your most valuable asset, making protection of it. One way to do that is to secure long-term disability (LTD) insurance.
Some companies offer a “base” or “standard” amount of coverage, but you must often enroll in this benefit. You won’t want to miss out on this opportunity.
Once you enroll, look at the plan’s stipulations.
What percentage of your salary is covered? Many plans offer anywhere from 40-60% of your base salary (be careful - especially of you are a high earner, there are usually caps for how much total can be paid out per month), but if you have the option to increase your coverage to 60-70% then you should strongly consider it
How long will you have to wait to receive your benefits, i.e., how long is the elimination period? Elimination periods can be lengthy, usually 90-180 days.
How long will the benefits last? A company’s LTD policy may pay out only over a certain period (which can be as short as just a couple of years) or may, regardless of your age at the time of the disability striking, cover you until you reach your retirement age.
Should you need to use the benefit, payments would be taxable if the company pays the premiums but not if you do - or than can be a pro-rated hybrid. Your company may also offer supplemental LTD insurance. Since insurance and risk management are so unique to every person, speak with your CERTIFIED FINANCIAL PLANNER™ to discuss if an additional policy makes sense for you using the group policy at work or a private policy.
Group plans, while often less expensive than private ones, generally have a much broader definition of disability, such as “any occupation” versus “own occupation,” which could easily limit your ability to qualify. It may make sense to purchase a separate individual policy outside of work, especially if you’re in a highly specialized professional field. Anglia Advisors can help you shop around find the best one for your particular situation, using one of our independent broker partners.
Short-Term Disability Insurance
In addition to long-term policies, many companies also offer short-term disability insurance. Like with the long-term policy, analyze the plan’s details to see if it makes sense to enroll.
How much of your base salary will be covered? Many short-term policies cover more of your income, like 70-80% as it’s a shorter time frame.
What’s the elimination period? 30, 60, 90 days?
How long will the coverage last? You’ll often see anywhere between 25-30 weeks.
Many companies have separate rules for using short-term disability policies for maternity leave. If you’re planning a maternity leave this year, look at the options available to you.
Life Insurance
Life insurance is designed to protect your family, dependents, and loved ones in the event of your death.
Many companies offer employees a set amount of group term life insurance, sometimes with the option to purchase additional coverage. For example, your employer might offer 1x or 2x your base salary in life insurance with the option to purchase up to 8x that number. Some companies may offer a fixed dollar amount in the case of an employee’s death, regardless of salary.
Remember that company-paid coverage over $50k is considered a taxable benefit and the applicable premium must be imputed to your taxable income.
Remember also that any buy-up additional coverage offered will likely determine the premiums you pay on a tiered system which ties your premium to your age, increasing them as you get older and hit a new age tier. This is different from many private term policies where premiums are fixed for the term of the coverage. At older ages, these premiums can start to become be very expensive. Be aware of these future premiums and at what ages they kick in.
Life insurance is usually only necessary for those with any kind of dependents. If you don’t have anyone else dependent on your income, then you could just take any coverage that your employer may offer for free and call it a day.
Those who do have a life insurance need should also explore getting an individual policy privately. It’s often best to buy a separate term life insurance policy privately to supplement your work one so that if you lose your job or move companies, you won’t also lose your coverage (since group life insurance policies through your employer don’t move with you).
If you’re young and relatively healthy, you can often get a very attractive rate on 10, 20 or 30-year term life insurance in the private market, an Anglia Advisors’ independent insurance partner can shop around all the carriers on your behalf and find the best one for your particular situation.
How much life insurance should you buy?
As a rule of thumb, as a family breadwinner, you’ll want at least around 10x your annual salary as a death benefit. However, that amount may be too low or high depending on your family’s financial needs should you pass away (i.e., paying off a mortgage, paying for college for multiple children, etc.). A life insurance needs analysis conducted by your Anglia Advisors planner can determine this amount much more accurately.
If you will likely have difficulty purchasing a private term policy at a reasonable cost for some reason (you’re based overseas, beyond middle-aged, have any difficult health conditions etc.), then buying a supplemental policy through your employer which will not penalize you for these things could be a better idea than going the private route.
You can often qualify for up to around $250k death benefit without the need to undergo a medical exam in a group plan, which could be helpful if you’re worried about qualifying because of your health or if you are, or have been a smoker (or even a vaper) at any time over the last two or three years, which can cause meaningfully higher premiums or even a refusal of coverage in some non-group plans.
A quick reminder here to update and make sure that you have the named beneficiaries you want on all your life insurance and retirement plans.
Save And Invest For Your Future With Workplace Retirement Accounts
Many employers offer some sort of retirement savings plan, whether it’s a 401(k), 403(b), 457, Thrift Savings Plan (TSP), SIMPLE IRA, or others. To encourage and support additional savings, some employers also offer a company match — usually anywhere from 3-6%.
The absolute, non-negotiable minimum amount you should allocate to your retirement contributions is at least enough to receive the full company match. This is free money on offer, so always take advantage of it.
Sometimes companies have confusing language and structures to their match programs. Say, for example, your company says they’ll match 100% of the first 2% you contribute, plus 50% of the next 4%. In plain English, that means you’ll have to contribute at least 6% to receive a 3% match. If you’re confused about how your company’s match works, reach out to your human resources department or to your Anglia Advisors financial planner.
If you are contributing to the pre-tax version of the plan, all contributions will be deducted from your taxable income on both a federal and state level (see the example right at the beginning of this piece). Some plans offer Roth options, where you make contributions with post-tax dollars but which are then forever tax-free. You can mix and match the two types.
Beyond the match, it pays to be strategic. Talk to your Anglia Advisors planner about whether to switch over to IRA contributions at this point or continue to contribute to the employer plan. This will depend on the quality and associated costs of the plan that the employer offers.
Some companies also offer profit sharing plans and will contribute to your retirement account on the company’s behalf.
Remember that just because you’re getting your full company match, does not mean you’re “maxing out” your work retirement plan. The 2025 max is $23,500 ($31k if you are 50 or older) per year on 401(k)s, 403(b)s, and TSPs, so if you can afford to save more for retirement, you should talk to your Anglia Advisors planner about the best way to go about that. This limit does not include what the company may match.
If you are really lucky, your employer may offer the ability to make a Mega BackDoor Roth contribution. I explain that here.
EXTRA PERKS TO LOOK INTO
Now that we’ve explored the biggest benefits — health plans, insurance, and retirement accounts — let’s turn our attention to some other benefits your company may offer.
Look through your company’s benefits plan to see if there are other opportunities worth signing up for. Here are some you may come across that might be of interest:
Finance-Focused
Group Legal Plan – For a relatively low monthly subscription, you can access a network of attorneys that can help you with minor defenses and certain document preparation. Be a little careful, however. When it comes to bigger ticket items like preparing a full estate plan, for example, or family law matters - then often what is offered under the plan may be minimal and there can easily be some significant “up-selling” to get the service to an acceptable level which might end up being more expensive and/or of lower quality than if you had gone directly to an attorney outside of the plan in the first place. My advice is to use this service only for relatively minor, low-level legal work.
Discounted Property and Casualty Insurance – There may be a group discount if you sign up for either property or casualty insurance through your employer.
Employee Stock Purchase Plan (ESPP) – If you work for a publicly-traded company, you may be able to purchase company stock at a discount of 10% or 15%. These purchases are generally made in bulk with other employees a few select times per year, which is how you’re able to get a discount. If you sign up for this benefit, a portion of every paycheck will be set aside for this stock purchase. It often makes sense to then sell as soon as possible but make sure you consult with a tax professional before selling this stock since there are special tax considerations.
Store Discounts – If you work for a retail company, often you’ll receive 10-50% off purchases at that store. Make sure you don’t buy things you wouldn’t already use, but it can be a nice benefit if you shop at the store frequently.
Employee Development
Tuition Reimbursement – If you’re planning on completing a degree relevant to your current job or going back to school for a graduate degree, some employers will help cover the costs. Many employers will cover up to the IRS-mandated limit of $5,250 per year. Keep in mind, this is the federal amount that you can receive from your employer before paying taxes on this benefit. If your employer pays more than that in education assistance in a single year, you must generally pay the tax on the amount above $5,250.
Continuing Education & Professional Development – CE can be costly to keep up specific certifications, but many employers will help cover them. Find out if your employer will help foot the bill.
Charitable Matching and Volunteer Days Off – Many Fortune 500 companies will offer to match any charitable contributions that you make each year up to a set dollar amount (usually around $1,000). Some companies even allow a certain number of paid volunteer days off each year, along with an incentive to do so.
“You” Time + Other Personal Benefits
Wellness Programs – You may be offered a monetary incentive for completing health and wellness-type activities, like walking, running, group fitness, etc. Again, this is free money. Your company might offer on-site fitness classes or discounts on memberships to local gyms. You might also get free or discounted flu shots at employee health fairs or retailers like CVS, Walgreens and supermarket pharmacies.
Paid Vacation & Sick Time – Americans are some of the most likely people to let vacation days go to waste. Find out if you can carry over unused sick days and vacation days from one year to the next. Often, you’re given a certain amount of vacation days (i.e. 2-4 weeks) or Paid Time Off (PTO) per year. In some cases, they carry over to the following year. Some companies even allow you to buy additional PTO. If you have this option, it’s a wonderful benefit to take advantage of. Don’t let those extra days go to waste.
Identity Theft Monitoring – This is set to be one of the most significant company benefits for employees that work from home. Cybercrimes have increased recently, and many companies have responded by offering access to additional security and data protection measures. If you have ever been a victim of identity theft in the past, it may be worth your time to pay for this service. Otherwise, you can monitor your own accounts and be sure to check your credit report regularly.
Commuter Benefits – Some companies will reimburse you for everyday commuter expenses such as tolls, parking, metro cards, bus passes, etc.
Benefits for Parents
Paid Parental Leave – Gone are the days where paid time off after having a baby was only (sometimes) offered to the birth mother. Many companies are now embracing the idea of paid “parental” leave, meaning any new parent from birth, adoption, or surrogacy can be eligible for paid time off. Depending where you live the state may offer additional compensated time off work.
Childcare or Childcare Assistance – Some employers may offer reimbursements for childcare up to a certain amount or even provide backup childcare services on site.
NOT SO MUCH
Although your company may offer a wide range of benefits, some may not be such a good deal:
Pet Insurance – While the idea of pet insurance may seem tempting, it often doesn’t make sense financially unless you have a particularly sickly furry friend. The monthly premiums and high copays often exceed the price of the occasional uninsured vet visit.
Spousal Life Insurance Coverage – If your spouse is covered by a life insurance policy through their employer or has an individual policy in place, additional life insurance coverage may well not be necessary.
Term Life Insurance for Children – There is almost no circumstance where this type of insurance makes any sense. These policies usually only cover a small amount ($10,000, for example) and seem to work on the highly flawed assumption that a child is actually a net contributor to the family income pool, when actually the exact opposite is true.
Supplemental AD&D – A base level of Accidental Death & Dismemberment insurance is often provided by your employer for no cost. It doesn’t really make any sense to purchase any additional supplemental coverage, since AD&D is a bit like life insurance but only pays out if the death or injury conforms to a set of particular, pre-determined (and in some cases, rather unlikely) circumstances, meaning that the coverage cannot be relied upon when planning. As an example, contracting an illness and dying from it or dying from a heart attack or stroke would not qualify for a death benefit under most AD&D plans, but being killed by being hit by a bus would. Take whatever is offered for free by the employer, but don’t bother paying for any more.
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