July 1st is here and that means Texas A&M employees (and retirees) are receiving another reminder that a new school year is fast approaching; open enrollment has begun. While there is no clear understanding of how the fall semester will unfold, your benefit options for the school year are available. You should take some time to review your current benefit choices and see if changes may be needed. It could prove financially beneficial. For example, we helped a client save roughly $16,000 per year during an open enrollment period when we realized together that he no longer needed an optional life insurance policy because he already had adequate protection. This is an extreme example, but the smaller savings add up, too!
Just how beneficial might it be for you? Read some of the options and considerations we address below.
Throughout this blog post, we reference Texas A&M’s benefits booklet. You can access the current year’s booklet here.
Health: Premiums for A&M Care for full time employees remain the same.
Texas A&M Care provides excellent coverage. Even though as an A&M employee you do not have a choice to make on your individual coverage, this is a great time to reevaluate dependent coverage.
- Has your spouse or child (under age 26) recently obtained or lost employer-provided coverage?
- Have you had or are you expecting an addition to your family?
Dependents who become eligible for coverage through a Qualified Life Event during the 2021 plan year can be added during the year, but the coverage must be added within 60 days of the qualifying event. If you missed that deadline for a qualified event during the 2020 plan year, you can make the change now.
New features include:
- Family, group and marriage counseling will now be covered.
- Virtual Visits is a new telemed feature provided by MDLive through the plan. Virtual Visits are included in the A&M Care plans with only a $10 copay.
As a reminder, you can save $30 per month per person if you and your covered spouse complete the wellness exam and health assessment by June 30th each year. That’s $360 per year for you and if married $720 total.
- Due to COVID-19, this deadline has been extended to August 31, 2020
Also, St. Joseph and Texas A&M established a partnership in 2018 which offers employees and retirees reductions in co-pays and co-insurance costs. Read more about it here.
Dental: Premiums for both dental plans remain the same.
When deciding on dental insurance, you need to consider how you will use it.
- Do you want to be able to choose the dentist you work with?
- Does your dentist accept insurance?
- Do you just go for preventive care, regular cleanings and X-rays?
- Are you seeing some issues, periodontal or cavities, that will need to be tended?
- Is someone in the family headed for orthodontia needs?
A&M Dental PPO allows you to choose your dentist. Costs for care vary depending on whether the dentist is a PPO, Premier or a non-network provider. Your costs will be lowest with a PPO dentist and highest with a non-network dentist. Up to 3 regular or periodontal cleanings are fully covered per year (deductible does not apply).
All other services have a deductible of $75 per person and $225 per family per plan year. For basic services, you pay the deductible plus 20% of the maximum allowable charges. For major restorative care, you meet your deductible and then pay 50% of the maximum eligible charges. The maximum annual benefit is $1,500. Preventive care does not count toward the maximum benefit. The maximum lifetime benefit for orthodontia is $1,500 per person.
DeltaCare USA Dental HMO requires you to use one of the plan-participating dentists. There is no deductible or maximum benefit with this plan. While your 6-month exams are free, you will pay $5 for cleaning, and panoramic X-rays are limited to once every three years. There are pre-set fees for basic care costs, such as fillings and crowns. Orthodontic care treatment also has pre-set prices for treatment plans and records. Your benefits booklet provides some examples of these fees.
We have provided annual costs for the coverages to allow you to get a better idea of what you are paying.
The annual cost of dental insurance is:
If you and your dependents are seeing the dentist for preventive care and minor basic care, then you might consider not paying for dental insurance. Six-month checkups usually run from $100 to $300 annually per person.
Vision: Superior Vision premiums have a small monthly increase: $0.60 for employee, $1.24 for employee and spouse, and $1.72 for employee and family coverage.
A&M Care Your health plan provides for one preventive eye exam per year through an in-network provider, and has a $30 copay. There are also discounts on exams, frames, lenses and laser vision services through Davis Vision, Inc. and EyeMed Vision Care.
Superior Vision This plan provides coverage for eye exams, eyeglasses, and contacts, and it offers discounts on some surgeries. When you use a network provider, you pay a $10 copay for exams. There is $15 copay for purchasing glasses and/or contact lenses through a network provider. The plan covers one pair of eyeglass lenses and contributes up to $150 for the frames each year. If you opt for contact lenses, then the allowance is $150. If contact lenses are medically necessary, then they are covered in full. Note that there are higher costs for non-network providers. The annual cost of coverage is $91 for an employee, $193 with a spouse, $150 with children, and $267 for family (spouse and children).
New this year, the plan provides full coverage for polycarbonate lenses and standard antireflective lenses for participants and dependents underage 18.
If you or a member of your family need glasses or contact lenses, then this plan will likely benefit you. However, before deciding, you may want to check out the discounts available through A&M Care.
Disability: Disability premiums have not changed.
This coverage provides up to 65% of your base monthly salary (maximum $8,000) if you suffer a disability and are unable to work. The amount you receive is reduced by any income you may receive, such as sick pay, Social Security, TRS, and Workers’ Compensation. There is a 90-day elimination (a.k.a. waiting) period before benefits begin. Think of this 90-day elimination period as your deductible for the coverage. Due to the 90 day waiting period, it is important to have an emergency savings to supplement your income if something were to happen.
If premiums are paid with after-tax money, the disability income is tax-free. If the employer pays the premium, the benefits are taxable. Benefits are provided monthly until the employee is no longer disabled, or has reached the duration of the benefit. For more details, please review the A&M benefit booklet.
The premium rates are based on $100 dollars of salary replacement. For example, if your base monthly salary is $7,000, the cost of replacing 65% would be $150 annually at the non-tobacco rate and ($193 until you have been tobacco-free for at least three months).
The probability of becoming disabled is much more likely than death during your working career. This group policy is a very inexpensive way to provide significant financial protection for you and your family should the need arise.
Life: Premiums for life insurance have not changed.
Life insurance is a very important part of financial planning for your family when members are dependent on one another for support. This support can take the form of income or services provided to the family. Income is generally understood. An example of services might be childcare currently provided by a spouse that would create significant additional costs if you had to pay for them.
The A&M system health plan provides a minimal amount of coverage, $7,500 life insurance and $5,000 accidental death and dismemberment coverage for you, as well as $5,000 of life insurance for each dependent child.
You can purchase Optional Life Insurance for an amount between one-half and 6 times your salary, up to a maximum of $1 million (please note proceeds paid to the beneficiary are income tax-free). After your initial enrollment period ends, you must provide evidence of insurability to enroll in or increase life insurance coverage. The initial enrollment period for new employees ends 45 days after the hire date.
The premium you pay is based on your age on September 1 of the plan year and the monthly rate per $1,000 of insurance coverage. The rates increase with every 5 years of age beginning at age 25. If you are relatively young, this may be a good option for you. The chart below gives you an idea of the cost progression with age.
|Age||Amount of Coverage||Annual cost|
You can also purchase Dependent Life insurance for your spouse and children. Your plan booklet provides information.
Optional Life coverage may be a good option for you when you are younger. However, if you will need coverage long term (10+ years), you should explore the cost of purchasing a level term life insurance policy from an independent source while you are young and healthy and don’t have concerns about insurability. Note that you can drop Optional Life coverage at any time but can only add it during open enrollment.
Accidental Death & Dismemberment (AD&D): Premium per $10,000 of coverage for employee only is reduced from $1.68 to $1.20 annually, while the employee & family premium remains $2.88 per $10,000.
As the name implies, the policy pays benefits as a result of an accident resulting in death or dismemberment. It does not require evidence of insurability and you can choose Employee Only or Employee & Family. Check your plan booklet for the payout percentages for dismemberment and for family members. You can choose coverage of up to 10 times your salary, with a minimum of $250,000 and a maximum of $800,000. This coverage is very inexpensive. For example, $250,000 will cost $30 annually for an employee only and $72 for an employee & family. Note that these premiums are deducted on a pre-tax basis which means that any benefits paid will be taxable to the beneficiaries.
When considering AD&D coverage, know that there is a reason the premiums are so low; insurance companies seldom have to pay the benefits.
Flexible Spending Accounts
The money you contribute to these accounts is deducted from your pay and is both income tax and FICA tax free. However, these contributions are made on a use or lose it basis. Your flexible spending accounts must be used for eligible expenses incurred between the date you begin participation and November 15th of the following year. The bills may be paid later but the charges must be incurred during that period.
You need to carefully consider the amount you want to contribute because unused balances do not carry over to the next year, they are forfeited and used to offset administrative expenses of the plan.
Important: Whether or not you want to make changes to your flexible spending account(s), you must re-enroll in the plan during open enrollment in order for contributions to be deducted from your pay during the 2021 plan year.
Health Care: The maximum amount you can contribute increases to $2,750 this year.
The plan allows you to pay for medical, dental, vision and hearing expenses not covered by your other A&M benefit plans, as well as copays you incur. You do not have to be enrolled in an A&M health plan to participate in the plan.
Dependent Day Care: The maximum amount you can contribute to the plan is $5,000.
Like the health care spending account, contributions are deducted from your pay pre-tax, so you never pay income or FICA tax on these dollars. The funds can be used for day care expenses that are necessary to allow you and your spouse to work. You are eligible to enroll if
- your spouse works, is a full-time student or disabled.
- the expenses are for a dependent that lives in your home at least 8 hours per day, can be claimed as a dependent on your tax return or is in your legal custody.
- the dependent is age 12 or younger, or an older dependent who requires care due to a disability.
The expenses covered under the Dependent Day Care spending account are the same expenses that are eligible for the dependent care income tax credit. The tax credit is based on the expenses paid, up to $3,000 for one dependent, up to $6,000 for more than one. The amount of the tax credit you receive is based on your income. If your adjusted gross income is $15,000 or less your credit will be 35% of the eligible expenses. Between $15,000 and $43,000 the credit is reduced 1% for every $2,000 increase in gross income. Above $43,000 the credit is 20% of the eligible expenses.
You can use a combination of the spending account and the tax credit to offset expenses, but you cannot use the same expenses for both. If your expenses are more than $5,000 per year, you can use the spending account for the first $5,000 and then up to $1,000 of the remaining expenses for the tax credit.
Depending on your income tax rate, combined with FICA taxes, and your dependent care costs, the spending account may be more beneficial than the tax credit. The benefits booklet recommends you see the NAVIA website at www.Navia.com to determine which works better for you. You might also consult you tax preparer or financial advisor.
Voluntary Retirement Plans
In addition to the mandatory plans, either ORP or TRS, you can voluntarily contribute to a Tax-Deferred Account and/or a Deferred Compensation Plan (Texa$aver). You can contribute to each on a pre-tax or post-tax (Roth IRA) basis. For 2020 the maximum deferral amount has increased from $19,000 to $19,500 for each and there is an additional $6,500 contribution permitted for those age 50+ as well.
If you are already enrolled, this is a good opportunity to consider increasing your deferral amounts especially if you have consulting or other income in addition to your salary. If you are not currently enrolled, then you should consider how contributing might increase your financial stability in retirement.
While you’re at it, the A&M system provides several other benefits at no cost that you might want to consider as well. Take some time to peruse the benefits guide, and you might find something you didn’t even know you needed.
Now back to your regularly scheduled summer break
I hope this summary helps guide your choices among the excellent benefits offered by our neighbor, Texas A&M. At Briaud Financial Advisors, we have significant experience working with current and retired colleagues of yours. Please feel free to contact us if we can provide guidance that is specific to your situation.
Post written by Peggy Sherman, CFP®. She joined our team in 2007 and has expertise in Social Security and Tax Planning. Learn more about Peggy here.