There's nothing like your first full-time job to make you feel like you're officially #adulting ... and that stack of papers known as your employee benefits package to send those confidence levels plunging. Your college courses may have prepared you for a lot of things, but they probably didn't teach you what an HRA is, or why it matters.
Read on for a breakdown of the most common job benefits, from what they mean to why they're important, so you don't have to call your parents from the office bathroom and have them walk you through it.
Retirement may be decades away, but the sooner you start saving for it, the better off you'll be. Even if you can't contribute much (we get it; you have a lot of bills to pay all of a sudden), make sure you're saving something each month — and that's where your 401(k) comes in.
You typically get this retirement plan through an employer, and there are two kinds. The first is a Traditional 401(k), where your monthly contributions come out of your paycheck pre-tax. Those taxes catch up with you when you start making withdrawals in your golden years. The other type is a Roth 401(k), where you pay taxes on your contributions up front, but not on your withdrawals in retirement.
Employers may also offer to match a certain proportion of your contribution. So if you're contributing money, they will too — up to a certain amount. This is a great perk, and not taking advantage of it is basically turning down free money.
Health, Dental and Vision Insurance
It's time to move off your parents' insurance plan and onto your own. It's exciting! And confusing. Here's what some of those pesky terms mean.
Premium: The amount your insurer charges to keep your coverage active. Typically, your company will cover some of that premium, while you’ll pay for a portion out of your paycheck. Some companies will pay the premium in full.
Deductible: The amount of your health care costs that you’ll have to pay out of your own pocket — say, $1,000 a year — before your insurer starts to foot the bill.
Copay: A flat fee you may have to pay for a covered medical service. For example, you might incur a $10 copay every time you visit your doctor outside of your annual checkup.
Coinsurance: The percentage of your health care bills your insurer will pay for you after you’ve met the deductible. For example, it may pay 80% of any costs after the deductible is met, while you'll still be on the hook for 20%.
HDHP: A high-deductible health plan. It’s just what it sounds like: a type of insurance plan that has a higher deductible than most in exchange for a relatively low premium. You’ll typically get standard preventive care for free — such as an annual physical — but any bills beyond that you’ll have to pay out of pocket until you hit a high amount; say, $3,000 a year.
HSA: A health savings account. It lets you sock away pre-tax dollars to help pay for out-of-pocket medical expenses; your employer might even help pad the account with its own contributions. But there are annual limits to how much you can contribute to an HSA — currently $3,450 for an individual — and you can only open one if you’re covered by an HDHP.
FSA: A flexible savings account. It’s similar to an HSA in that it lets you sock away pre-tax money each year from your paycheck to cover health-related costs, but you’re not required to pair it with an HDHP. Unlike an HSA, the contribution limit is lower, at $2,650; it’s mostly “use it or lose it,” meaning you can’t roll over the funds to use for the following year; and you can get an FSA only if your employer offers one.
HRA: A health reimbursement account. These accounts reimburse you for certain qualifying medical expenses not covered by your standard insurance plan. This could come in the form of a pre-loaded debit card to be used at the time of the expense, or you may be responsible for saving and submitting receipts after the fact.
You just landed your gig, so you're probably not about to skip out for a vacation, but you will at some point and it's important to know your company's PTO — or paid time off — policy for when you do.
For starters, know exactly what your company is referring to when they say "PTO." At some places, this covers all of your allotted time off for the year, from vacation to sick to personal days, while at others, these categories may be separate, with a certain number of days assigned for each.
You'll also want to be clear on how your new employee status will affect your PTO, if at all. You may need to be with the company for, say, three months before you're able to take any time off, or you may be eligible to start using your PTO from day one. Be sure to confirm with HR before you book any flights.
Unless you're one of those lucky people who live within walking distance of their office, you're paying to commute every day. Many employers want to help relieve the burden in the form of commuter benefits.
Your company may let you pay for your monthly train or subway costs with pre-tax dollars, or set up a tax-exempt account to help pay for parking costs. Other employers may just cover your transportation costs outright or provide shuttles to public transportation hubs so you can leave the car at home.
Employers are more and more committed to ensuring their employees are happy and healthy. That may translate to partial reimbursement on your gym membership, allowing you to pay for that membership with pre-tax dollars or in-house yoga classes or meditation workshops.
And these benefits may not be limited to just your physical well-being. A growing number of employers are also focusing on their employees' financial wellness, giving them access to financial literacy courses or coaching.
Student Loan Repayment
Many employers realize that college graduates have a whole lot of debt — in the form of student loans. Some offer student loan repayment assistance to help lighten the load, meaning they'll contribute a set amount each year toward your loan balance.
We know; you're young and invincible and nothing will ever happen to you ... except that it could. And if you find yourself too injured or sick to work, disability insurance could pay out a percentage of your salary, allowing you to keep yourself financially afloat.
There are two types: short-term (which typically lasts up to six months) and long-term (which can last years depending on the policy). Generally, a policy will cover 60% of your income while you're unable to work, and you'll be responsible for paying for a portion of the premium out of your paycheck. If your employer offers this type of coverage, either at a discounted rate or at no cost to you, it may be worth looking into.