*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you’d like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.
Like many other employees, my husband’s benefit elections enter the annual open enrollment period in November. Here are some changes I am making to 401(k) contributions, medical, dental and vision insurance, FSA withholding, and commuter expenses for 2012 because of new laws and a new family member.
Higher 401(k) limit
For 2012, the maximum annual limit for 401(k) contributions is increasing from $16,500 to $17,000. For most companies, the employee’s 2011 401(k) elections will automatically roll over to 2012. So, if we wanted to increase or decrease our retirement savings contribution, we would have to do it now. His company match remains unchanged. If we made the maximum contribution, and our tax rate is 25%, we would be able to defer an additional $125 ($4,250 total) in federal income tax that would otherwise be due this year.
Health and dental insurance
Premium for our health insurance plan increased yet again, by over 10%. Unlike my former employer, which offered a choice of different health insurances, my husband’s employer offers only one plan, so there is little we can do. Our coverage rolls over from year to year. Part of the increase is attributed to the 2010 Affordable Care Act. Changes include extending dependent coverage to children up to age 26, without a requirement that they be a dependent, student, unmarried, living with parents or have disabilities. In addition, our insurance removed the lifetime limits on benefits. Our dental plan cost and benefits remained unchanged.
Vision insurance
Our vision insurance costs about $100 per year. Although my husband and I both wear eyeglasses, we believe paying for vision insurance is not cost effective since we seem to get back in benefits close to what we paid. Although the plan provides for free annual eye exams with a small copay, hardware such as contact lens and eyeglasses are covered only every 24 months, and even that is subject to limits of $120. Even with discounts, we seem to have to pay out of pocket for numerous items, including anti glare or scratch proof coating on eyeglass lenses, thin lenses, higher index powers etc. So, we skip this insurance. We get our eyes examined at an ophthalmologist (a co-pay) and buy eyeglasses either on sale or abroad. I buy my contact lens online. Paying pre-tax (FSA) for vision offers more flexibility and savings.
FSA withholding
Thanks to the Affordable Care Act that was passed as part of the health care reform initiative, the reimbursement of OTC drugs and medicines from a health flexible spending or savings account now requires a doctor’s prescription. As a result, since last year, I have reduced my FSA contribution by the $100 or so dollars I generally budgeted for OTC medications such as cough-cold medicines, fever and pain reducers, and antacids. However, many other OTC items, including contact lens solution, contraceptives, even bandages, continue to be reimbursable without a prescription. The biggest change for my family is the birth of my child. I am budgeting extra for sick visits and medications, as her immunization well-visits are fully covered by insurance. Since FSA must be used up by the end of the year, I prefer to under-budget.
Commuter expenses
Although commuter contributions can be changed every month, new rules are in effect. The federal stimulus package known as ARRA, which allowed a monthly pre-tax maximum of $230 per month for the transit benefit, is expiring. The monthly pre-tax contribution for commuter expenses is being reduced to $125 starting in 2012, while the monthly pre-tax parking limit is being increased from $230 to $240 per month. As a result, our out of pocket cost for our commuting expenses (net of tax savings) will increase slightly.