New job? Make the most of your employee benefits
These four steps will help you get settled and get down to business.
New jobs bring new names, faces and responsibilities. In the rush of acclimating to the work environment, you might overlook details like direct deposit forms, insurance coverage and retirement plans. But it’s important to make the most of all your new job’s benefits—from Flexible Spending Accounts to tuition reimbursement programs to 401(k) plans. To help you make the most of your workplace perks, we’ve put together this job transition checklist.
Set up direct deposit
One of the benefits of direct deposit: It’s usually the fastest way to get your wages or salary into your bank account. If you’d like to sign up for direct deposit, do so as soon as possible because it may take up to two pay periods to take effect. You may want to stop certain automatic bill payments, transfers or withdrawals from your account until you’re sure direct deposit is in effect. Once you’ve checked your new pay cycle, you can reinstate your automatic transactions, or establish new ones, and even adjust your automatic bill payment dates to sync up with paydays.
Read up on your insurance plans
Your new job might offer you health insurance coverage and perhaps dental, vision, accident, disability or life insurance, too. Employer benefits vary, so take the time to review your plans and their coverage specifics. You’ll want to know how they apply to you and anyone else covered by the plan, such as your spouse or children.
However, keep in mind that you may have a limited time period to enroll in these benefits upon hire or you will have to wait until the next annual enrollment opportunity.
Take advantage of pre-tax benefits
Pre-tax benefits can lower the amount of wages you owe federal (and possibly state and/or local) income taxes on. The money comes out of your paycheck before certain federal (and possibly state and/or local) taxes are withheld and may not count as taxable income. Pre-tax benefits may include:
- Contributions to retirement accounts
- Health insurance premiums and Health Savings Account (HSA) contributions
- Flexible Spending Account (FSA) contributions for expenses like child care, dental, vision care and eligible out-of-pocket medical expenses
- Certain transportation and parking benefits up to a certain amount per month
Consider your choices for your retirement account
If you have retirement account in a previous employer’s defined contribution plan, you have a few options for it when you start a new job. Depending on the terms of your retirement plan, you may be able to simply leave it where it is. You may be able to move it into your new employer’s retirement plan if the new employer’s plan allows rollover contributions or into a traditional or Roth IRA. You may cash it out, depending on the plan’s terms. Or you can do a combination of these things.
Consider all the factors and implications before you make your choice. For example, if you elect a distribution of your pre-tax contributions and earnings of your retirement account in cash when you leave a job, your distribution will be subject to federal income tax and potentially state and local tax, as well as a likely additional 10% federal tax if you are not at least age 55 in the year of distribution unless an exception applies. The distribution might also push you into a higher tax bracket.
Each choice involves potentially different investment options and services, fees and expenses, withdrawal options, required minimum distributions and tax treatment (particularly with reference to employer stock), and provides different protection from creditors and legal judgments.
No matter how you decide to handle the benefits your new job offers, make sure to dig into your new employer’s plans and policies early. And don’t be afraid to ask questions. Your human resources and benefits representatives can help you make sense of the employer’s policies and programs. The better you know your new job’s benefits, the better you can take advantage of them.