Open Enrollment season can feel pretty confusing. There are so many benefit options at different costs, and it’s always happening during the busy holiday season! Most people choose their benefits at the last-minute or go with whatever they picked last year, unsure if they’re missing something or leaving money on the table.
After years helping DC Government employees with their finances, I put together an overview of the available benefits and some notes on each. The toughest choice might be which healthcare plan to pick, so that’s at the end with a look at all the options.
If you have questions or suggestions for information to add, let me know at andrew@katzmosesfinancial.com. To be clear, none of this is individual financial advice. Seek out the help of a professional if you need it.
FREE CAPITAL BIKESHARE MEMBERSHIP
Let’s start with my favorite – a free Capital Bikeshare membership! Capital Bikeshare is a wonderful network of bike rentals you can use to get around the DC area. For DCPS employees, membership is free. More details on how to enroll here.
FLEXIBLE SPENDING ACCOUNTS (FSAs)
FSAs allow you to spend pre-tax dollars on certain kinds of expenses throughout the year. DCPS offers FSA options for parking, commuter transit (SmarTrip), dependent care expenses (this is an important one for parents), and healthcare.
If you expect to have significant costs with any of the above areas, an FSA is a nice way to save money.
With a healthcare FSA in particular, you get the full balance upfront in January to spend right away but get to pay for it in smaller installments each pay period. You can track your expenses through the DCPS provider’s app, Benefit Resource.
See in the example below how putting $2,500 in an FSA saves you ~$1k in taxes.
Note: Dependent Care FSA is use it or lose it, so only put in what you know you’ll use. Most parents with kids in daycare will easily use up the $5k max. Healthcare FSA you can carry over ~$550 to the next year. Parking and transit carry over from year to year.
If you ever end up with too much in your health FSA to roll over, you can always go to the FSA store and load up on stuff you’ll use later (what a silly healthcare system we have in the US).
LIFE INSURANCE
DCPS provides relatively low-cost life insurance of your annual salary (rounded up to the nearest $1,000) + $2,000, with the option to purchase more for an added cost.
For most people, getting independent term life insurance is probably a better deal than buying extra life insurance through DCPS. The cost is locked in at the same rate as you get older and it stays with you if you leave your job. If you use DCPS life insurance, it’ll get much more expensive as you get older, and when you leave your job you have zero coverage. If you’re relatively healthy, I generally recommend getting coverage independently from your job. Sites like Policygenius or Ladder Life can help you source quotes.
That said, DCPS life insurance can be a good option for people who may have a hard time qualifying for independent life insurance because of health issues. It can also be a useful short-term measure while working through obtaining an independent term policy.
Last, you should know why you’re buying life insurance. It’s a good idea for people who have others depending on their income (like parents or someone with a lower earning spouse), but not everybody needs it. And be very careful buying life insurance from salespeople, particularly Whole Life and Universal Life. Many products are unnecessary and incredibly expensive.
DISABILITY COVERAGE
Short-term disability: Short-term can be valuable if there’s a decent chance you think you’ll be out of work for 3-6 months (pregnancy is a common use). It may not be necessary if you have a strong savings cushion and can afford being out of work for a couple of months.
DCPS Short Term disability coverage provides you with ~66% of your income (up to a maximum of $7,500/mo). Short-term can be used after 20 days of being unable to work and lasts 6 months. It can be used for pregnancy.
Long-term disability (LTD): Long-term is valuable for most people, as it replaces a portion of your income if you can’t work for longer than 6 months. Most of us wouldn’t be able to handle being out of work for years financially, and that’s what Long-term disability protects against.
Long-term can be used after 180 days of being unable to work and lasts until you turn 65 (as long as you remain disabled). For more information, check out this piece on it from a fellow advisor.
I typically recommend choosing to pay for disability policies after tax. This way, if you need to use them the benefits are tax-free. The savings from paying disability pre-tax aren’t much anyway.
SICK/PARENTAL LEAVE BANK
If you’re a WTU/CSO member planning to have a child, you should probably sign up. You trade one day of leave for 30! Same goes for anyone expecting lots of time out sick or in recovery from a medical procedure.
DENTAL AND VISION
Basic vision and dental coverage are provided for WTU members. The in-network only dental plan is better than the PPO for most people, but the PPO is still good if your dentist is out-of-network and/or doesn’t take insurance.
For central office folks, the basic dental plan is ok for basic cleanings and check-ups. If you’re expecting more dental work, you might consider enrolling in the more expensive plan.
LEGAL BENEFIT
As a part of WTU/CSO, you have access to an underrated legal benefit. You can use it for estate planning, divorce, tenant protections, visa petitions, insurance claims, and so much more. Check out this WTU page for more details.
If you only use it to create estate documents like a will, power of attorney, advance medical directives, etc. it pays for itself many times over.
RETIREMENT
As a WTU or CSO member, you’ll automatically contribute to the teacher pension plan. The pension is fairly complicated and I made a separate FAQ just to cover it. If you’re a central office employee, you don’t have a pension but you do automatically get 5% of your salary deposited in a 401(a) account after your first year. It vests fully after 5 years.
Pension or not, you’ll likely want to save more for retirement. DCPS offers a 457(b) plan through Mission Square (formerly ICMA-RC), which offers low cost investments and lots of flexibility. To my great frustration for many years, DCPS also offers seven 403(b) plans which charge significantly higher fees than the 457(b). More on my issues with this confusing array of high-fee plans here. I usually recommend the 457(b) Deferred Compensation plan first because of its low fees, investment options, and flexibility.
You can update your retirement savings choices any time throughout the year in peoplesoft, not just during open enrollment.
You might also consider other savings options like a Roth IRA, Taxable Investments, or College Savings Plans. If you need help figuring this out, consider contacting a fiduciary, fee-only financial advisor.
HEALTHCARE
Now, the hardest part. Which healthcare plan to choose?
First, some basics. Healthcare plans that cost more out of each paycheck usually make it cheaper when you go to the doctor. If a healthcare plan is cheaper each paycheck, you’ll usually pay more when you go to the doctor.
If you go to the doctor frequently, it could make sense to use a more expensive plan. If you don’t go to the doctor much, it could make sense to use a cheaper plan.
DCPS offers 7 different healthcare plan in three categories: PPO, HMO, and HDHP.
A PPO (Preferred Provider Organization) offers lower cost in-network coverage and tends to cost more per pay period.
Benefits: flexibility, ability to see a wider range of medical providers
Downsides: cost of healthcare and services are all higher than with an HMO
PPO’s are best if you want to see doctors outside of a limited HMO network, travel often and might need coverage outside of your home area, or have significant medical costs with providers who don’t take insurance. DCPS offers Aetna and CareFirst PPO’s and both are comparable in cost. If you want a PPO, go with whichever offers the most convenient in-network coverage.
An HMO (Health Maintenance Organization) generally only offers in-network services at a select network of doctors, hospitals, and clinics.
Benefits: lower costs, simple set of providers
Downsides: there’s no out-of-network coverage, meaning you’re on the hook for costs if you go to someone who isn’t part of the network.
An HMO is best if you have easy access to in-network providers, are confident you won’t need much out-of-network care, and want a simpler plan. DCPS offers Aetna, CareFirst, United Healthcare, and Kaiser Permanente HMO options. They’re all comparable in cost, so go with whatever offers the most convenient coverage for you.
An HDHP (High Deductible Healthcare Plan) is what it sounds like – a plan with a high deductible. You’ll pay more for doctor visits before insurance starts helping with the costs. The main benefit of a HDHP is that you can use a Health Savings Account (HSA). An HSA lets you save pre-tax dollars each year to use for healthcare. It’s different from an FSA in that an HSA has higher contribution limits and rolls over each year. The other major benefit of an HSA is the ability to invest the money you contribute, let it grow tax-free over time, and withdraw it tax-free in the future to use for medical costs.
The HDHP plan is best if you expect to have low healthcare costs (less than $5,000/yr in-network) and are ok with Aetna’s in-network coverage. If you’re using this plan, I recommend using the HSA and considering investing the funds inside of it. For people who don’t go to the doctor much, this plan can be a slam dunk financially. DCPS offers one HDHP – the Aetna CDHP.
To illustrate which plan is best for you, let’s look only at the three Aetna plans: PPO, HMO, and HDHP. The chart below shows the total cost for each plan as you use more healthcare services. For in-network expenses, the HDHP (gray line) is cheapest when healthcare expenses are lower (<$5k), the HMO (orange) is cheapest when expenses are $5k-$15k, and the PPO (blue) is cheapest when expenses are high (>$15k).
Price isn’t the only thing that matters, of course – coverage and ease of use are also important. Some people will choose the high deductible plan because it’s cheaper, then neglect going to the doctor or using other healthcare services because they don’t want to pay the deductible! All these factors are worth considering when deciding on a plan.
Note: for out-of-network, the CDHP wins at less than $7k in expenses and the PPO wins for more than $7k. Because there’s no out of network coverage, the HMO gets extremely expensive quickly for out of network.
For a more comprehensive breakdown of the DCPS healthcare options, here’s a detailed analysis of all DCPS plans for an individual. You can compare what your total out-of-pockets costs will end up being at various levels of medical expense by looking at the graphs or checking out the tables in the second tab (Note: premiums are based off 2021 rates and have increased since).
I didn’t cover everything here (hello, AFLAC) so as not to overload with details, but I hope it’s helpful. Have more questions? Let me know!
Thanks for all your work supporting our community in DC 🙂