Employers that sponsor group health plans should provide certain benefit notices in connection with their plans’ open enrollment periods. Some of these notices must be provided at open enrollment time, such as the summary of benefits and coverage (SBC). In addition, employers should review their open enrollment materials to confirm that they accurately reflect the terms and cost of coverage. In general, any plan design changes for 2024 should be communicated to plan participants either through an updated SPD or a summary of material modifications (SMM).

This article provides a general overview of open enrollment and changes employers should communicate to employees during the open enrollment period.

Health Savings Accounts (HSAs)

Employers who sponsor high deductible health plans (HDHPs) that are compatible with health savings accounts (HSAs) should prepare for open enrollment by:

Ensuring that employees understand how HSAs work, including the benefits of opening an HSA; and

Updating their HDHP’s design and communicating any plan changes to employees.

Updating HDHP Plan Design

To prepare for open enrollment, employers should update their HDHP’s design to ensure that it complies with the IRS’ adjusted cost-sharing limits for 2024. Employers should also review their coverage options for telehealth and COVID-19 vaccines, testing and treatment. Any changes to the plan design should be communicated to employees at open enrollment time.

• For 2024 plan years, the minimum deductible is $1,600 for self-only HDHP coverage and $3,200 for family HDHP coverage.
• Individuals who are age 55 or older may make an additional $1,000 "catch-up" contribution.
• The 2024 contribution limit is $4,150 for individuals with self-only HDHP coverage and $8,300 for individuals with family HDHP coverage.

Communicating HSA Rules to Employees

As part of the open enrollment process, employers that offer HSA-compatible HDHPs should help their employees understand the benefits of opening an HSA and making tax-free contributions. Employees may be confused about the rules surrounding HSAs and may not realize all the advantages associated with these accounts.

HSA Advantages

Open enrollment is an ideal time for employers to highlight to eligible employees the advantages of selecting an HDHP/HSA coverage option. These advantages include the following:

• Lower premiums: HDHPs typically have lower monthly premiums than health plans with lower deductibles, which makes them a cost-effective option for many employees. Employees who enroll in HDHPs can contribute to an HSA to help offset the higher deductible.
• Tax savings: HSAs have three levels of tax savings: (1) HSA contributions can be deducted from employee’s pay on a pre-tax basis, which means they are not subject to federal income and employment taxes; (2) HSA funds grow tax-free; and (3) HSA withdrawals are nontaxable if they are used for qualified medical expenses.
• Employee ownership: HSAs provide more flexibility than other medical savings accounts because they are individually owned accounts. For example, employees keep their HSAs even if they switch jobs. Also, employees can continue to use their HSA money on a tax-free basis to pay for medical expenses even when they no longer meet the eligibility criteria for making HSA contributions.
• Savings opportunity: There is no deadline for employees to use their HSA money. Unused HSA funds roll over from year to year, allowing employees to save for future medical expenses.
• Ease of use: HSA funds can be used on a tax-free basis to pay for a broad range of medical expenses, including over-the-counter medicine and drugs. In addition to their own medical expenses, employees can use their HSAs to pay medical expenses incurred by their spouses and dependent children.
• Open at any time: During open enrollment, employers should encourage their HSA-eligible employees to set up an HSA if they have not done so already. However, an eligible employee can set up an HSA at any time, not just during open enrollment. Also, employees can generally elect to start making pre-tax contributions to their HSAs at any time during the plan year, even if they did not elect HSA contributions during open enrollment. This is an exception to the irrevocability (or “election lock”) rule that applies to most other pre-tax benefits.

Educating Young Employees on Open Enrollment

Many employees need help with open enrollment. This is particularly true among younger workers, who typically have less experience selecting benefits than older generations that have been in the workforce longer. A study by insurance and employee benefits provider MetLife found that 26% of Generation Z (Gen Z) employees are insecure about making benefits decisions.

Employers who successfully educate young employees about open enrollment are likely to find that workers are more satisfied with their benefits packages, make better financial decisions and are more likely to recommend their organization to other people. Such positive outcomes can significantly influence an organization’s overall financial performance.

Prioritize internal communications

Young employees may be unfamiliar with the open enrollment process. Inform employees about the upcoming open enrollment through multiple channels (e.g., emails, flyers and meetings). Ensure every employee knows when open enrollment begins, the last day to complete enrollment and the consequences of failing to enroll in time.

Create multiple avenues for communication

Ensure young workers know how to ask questions about open enrollment and feel comfortable speaking to HR and their managers about the upcoming enrollment. Encourage these employees to discuss their benefits plans with their friends, family and more experienced coworkers.

Provide educational resources

Give workers the information they need to make informed benefits decisions during open enrollment. To target young workers, employers should provide digital resources such as online webinars, videos, social media posts and articles.

Explain benefits options

Employees are likely to think primarily of health insurance during open enrollment and may overlook voluntary benefits that could be useful to them. Employers should provide information about employee benefits choices (e.g., pet insurance, student loan repayment assistance and employee assistance programs) so that young employees don’t forgo benefits they may want later in the year.

Cater to employee needs.

Young generations of workers have different benefits needs than older generations. For example, they’re more likely to prioritize mental health resources and student loan assistance over life insurance or financial planning for retirement. Employers should capitalize on the wants and needs of younger generations to educate them on benefits they care about.

Encourage young employees to take their time

Rushing through open enrollment can cause workers to forgo crucial benefits. This is especially true of young workers, who may feel stressed or unsure of the open enrollment process. Give employees ample time to research and select their benefits and encourage them to ask questions.

Communicate all year round.

Benefits education should be more than a flurry of activity during the open enrollment window. Employers should provide employees with the resources they need to understand and maximize their benefits all year round, highlighting the direct financial impact benefits decisions can have on employees. This can help young workers understand the importance of open enrollment and the impact that rushing through the process can have on their financial well-being, increasing the likelihood that they’ll make informed benefits decisions when the time comes.

Conclusion

Open enrollment can be a nerve-wracking period for all employees. The stress of selecting benefits is often most keenly felt by younger workers with less experience selecting benefits. Employers can use open enrollment as an opportunity to increase communication and trust with employees by educating them on the process and their benefits choices. This may increase satisfaction with their benefits packages and jobs, improving organizations’ employee attraction and retention and ultimately their bottom lines.

Contact your Bolton Consultant today for additional information.