Employer benefits people never claim

In short

I once watched a friend of mine hand back a $1,200 check at the end of a year, and I mean that figure kindly, because what he handed back was money his own employer had set aside for him. If you are holding a job with benefits, you have probably left something on the table too. Most workplaces offer a few extras that never get a headline. A good first step is to ask the benefits office for the plan guide and read it with a cup of coffee. Then look for the match on the retirement plan, the pre tax accounts for health and dependent care, and any tuition or student loan help. Write down each deadline on one calendar. None of this takes a special talent, only a little attention.

The whole of it

What it is

A neighbor of mine worked at the same company for nine years and never once opened the benefits packet. She told me she figured it was all fine print and legal talk. I understood that feeling. When the paperwork lands, it looks like homework, and nobody ever got a gold star for finishing it.

But a benefit is just pay that shows up in a different shape. Your employer may put money into your retirement account when you do. It may let you set aside pay before tax for medical bills or child care. It may pay part of a class, or part of a student loan. Some employers pay for counseling visits, legal help, or a phone line with a nurse. These go unclaimed because nobody sits you down and explains them. You are not at fault for that.

How it works

If you are curious how a payroll benefit works, picture a small pipe. Money leaves your paycheck, goes into a special account, and skips income tax on the way. Or your employer adds money to the pipe on top of what you put in. The plan documents spell out the rules, and the plan requires you to enroll, usually during a set window each year.

Take the retirement match. The employer agrees to add money when you save in the workplace plan, up to a stated percentage of pay. A 401(k) is a workplace retirement account where you save part of each paycheck. If the employer matches 3 percent and the worker saves nothing, the employer adds nothing. The match is earned by taking part.

Next come the pre tax accounts. A health flexible spending account lets a worker set aside pay before tax for medical costs. The money must be spent within the plan rules, and the plan may let some of it carry over or give a short grace period, but the employer decides which. A health savings account is different. It pairs with a certain kind of health plan, and the money stays with the worker from year to year. A dependent care account works the same way for child care or care of an adult family member.

Then there is education help. An employer may pay part of tuition. The tax code has also let an employer pay part of a worker's student loans without that money counting as taxable pay, but that rule was written with an end date, so the plan guide and Publication 15-B show whether it still applies. The Internal Revenue Service explains both in Publication 15-B, which covers fringe benefits. Other perks, like an employee assistance program, cost the worker nothing to use and tend to sit untouched.

The numbers, and where to find yours

I like to say that the numbers in a benefits plan are written down somewhere, and the trick is knowing which page. Start with the summary plan description. This is a plain language booklet the plan must provide to participants under the Employee Retirement Income Security Act, the federal law that governs most workplace plans. It states the match formula, the vesting schedule, and how to enroll. Vesting means how long a worker must stay before the employer's contributions truly belong to the worker.

For the yearly limits, the law sets ceilings that change over time. The most a worker may put into a workplace retirement plan in a year is the current figure, which the official source publishes each year. The most a worker may set aside in a health flexible spending account is the current figure, which the official source publishes each year. The most for a dependent care account is the current figure, which the official source publishes each year. The yearly cap on employer help with student loans or tuition under the tax code is the current figure, which the official source publishes each year. The site fills in each verified figure with its source and date, so check there instead of trusting an old article, including this one.

Your own numbers come from your own paperwork. Ask the human resources office three questions. What is the match formula? When do the employer's dollars vest? When does enrollment open and close? Get the answers in writing. A friendly email will do.

A worked example

Let me tell you about a woman named Maria. She is a dental office manager with a salary of $52,000 a year. Her employer matches 100 percent of what she saves, up to 3 percent of pay. For years she saved 1 percent because that was what she could manage.

At 1 percent, she saved $520 a year, because $52,000 times 0.01 is $520. The employer matched that same $520. Her combined yearly total was $1,040.

Then a coworker mentioned the match, and Maria looked at the plan guide. At 3 percent, she would save $1,560 a year, because $52,000 times 0.03 is $1,560. The employer would add the same $1,560. Her combined total would be $3,120 a year.

So by moving from 1 percent to 3 percent, Maria raised the employer money from $520 to $1,560. That is $1,040 more each year, simply for asking. Her own paycheck shrank by only $1,040 a year, which is about $20 a week, and she saw it come back doubled inside the account.

Now picture the dependent care account. Maria has a young son in after school care that costs $3,000 a year. If she sets that money aside before tax and her tax rate on that pay is 22 percent, she skips tax on $3,000. That is $3,000 times 0.22, or $660 not paid in tax. The 22 percent is only a sample figure, so her real rate may differ. Her own bracket shows on her tax return, and the tax tables from the Internal Revenue Service list them. Either way, the savings are real and small habits like this add up.

Where it goes wrong

I would be a poor porch friend if I only told you the good parts. These benefits have teeth, and I want you to see them.

A flexible spending account can punish a careless planner. If the worker sets aside too much and the plan does not let the money roll over, the leftover may be lost at the deadline. That is the use it or lose it rule. A careful planner sets aside only what the family can honestly expect to spend.

The match has its own catch. Vesting means leaving a job early can mean leaving part of the employer's money behind. The plan guide shows the schedule, so read it before a job change, not after.

Tax rules can bite too. If an employer pays education help above the yearly limit the tax code sets, the extra can count as taxable pay, and the limit and its exact rules are shown in Publication 15-B and in the figure on this site. The same is true if a worker claims child care costs that do not qualify. Rules for who counts as a dependent get tricky, and Publication 503 from the Internal Revenue Service covers child and dependent care in detail.

Then there is plain forgetfulness. Enrollment windows close. Forms get lost. A new hire may have only a few weeks to sign up. Folks miss these dates all the time, and no one scolds them. The money just stays unclaimed.

Last, a benefit that saves tax is not always worth its cost. A pre tax account helps only if the worker would have spent the money anyway. Spending to chase a tax break is a poor trade.

Questions to answer before you leave this page

Do you know what your employer's match formula is, and have you saved enough to receive all of it? When does your enrollment window open, and what date does it close? Does your plan let unused flexible spending money carry over, or does it vanish at the deadline? How long must you stay before the employer's retirement dollars become yours? Does your employer offer help with tuition or student loans, and what is the yearly cap shown on this site? Have you asked human resources whether there is an employee assistance program, and what it covers? Which single date from your plan guide will you write on your calendar tonight?