Open enrollment can feel like another task on a busy calendar. But your choices can affect what you spend on health care, how much you save in taxes, and how well your family is protected financially.
Your employer’s open enrollment season lets you select benefits for the upcoming plan year. It often takes place in the fall. Outside this window, you may be limited in changing certain elections unless you experience a qualifying life event, such as marriage, the birth of a child, or the loss of other coverage.
Before renewing last year’s selections, consider what has changed. Your health, family, finances, or employer’s offerings may make different benefits a better fit for 2027.
Pick a health plan that works for you
Look beyond monthly premiums. A lower-premium plan may have a higher deductible, more cost-sharing, or a more restrictive provider network. Higher premiums may be worth it if the benefits better match your expected care.
HMO, POS, EPO, and PPO generally describe provider-network and access rules. A high-deductible health plan, or HDHP, describes a plan design that may also use one of these network arrangements.
Understand networks and referral rules
- Health maintenance organization (HMO). Coverage generally is limited to network providers, except for emergency care. Many HMOs require a primary care physician to coordinate care and provide specialist referrals.
- Point of service (POS) plan. Out-of-network care generally is available at a higher cost. These plans usually require a primary care physician and specialist referrals.
- Exclusive provider organization (EPO). Coverage is generally limited to network providers, except for emergency care. Specialist referrals often are not required.
- Preferred provider organization (PPO). You can generally see specialists without referrals and receive covered out-of-network care, but you usually pay less within the network.
Confirm each plan’s requirements and actual costs rather than assuming one type is always less expensive.
Understand deductibles and preventive care
A deductible is the amount you pay for certain covered services before the plan begins sharing those costs. Some benefits may be covered beforehand.
Many plans cover eligible preventive services at no cost when you use network providers. However, not every service provided during a preventive visit necessarily qualifies for no-cost coverage.
Consider a high-deductible health plan (HDHP)
HDHPs often offer lower premiums in exchange for higher upfront costs. For 2027, the minimum deductible for an HSA-qualified HDHP is $1,750 for self-only coverage and $3,500 for family coverage. Actual deductibles may be higher.
Certain preventive services may be covered in full before the deductible. Using network providers generally lets you benefit from negotiated rates even before you meet it.
Compare total health plan costs
Estimate each plan’s annual cost by adding premiums to expected care expenses, including deductible payments, copays, and coinsurance. Avoid counting the same expense twice.
Use last year’s care as a starting point, then adjust for anticipated procedures, prescriptions, or family changes. Your employer may offer a comparison calculator.
Also consider the in-network out-of-pocket maximum, which limits your annual cost sharing for covered in-network services. Premiums, noncovered services, and most out-of-network expenses do not count toward it.
If both spouses have workplace coverage, compare enrolling together in one employer plan versus maintaining separate plans. Watch for spousal surcharges and compare the cost of covering children under each plan.
Before enrolling, confirm that your preferred providers are in-network and understand how your prescriptions are covered.
Make the most of a health savings account
If you choose a health savings account (HSA) qualified plan, consider how an HSA could fit your budget. A high deductible alone does not necessarily make a plan HSA-qualified.
To contribute, you generally must have qualifying coverage, no disqualifying additional health coverage, and no Medicare enrollment. You also cannot be eligible to be claimed as someone else’s tax dependent.
For 2027, contribution limits are $4,500 for self-only coverage and $9,000 for family coverage, including employer contributions. Eligible spouses generally share the family contribution limit. Eligible individuals age 55 or older can contribute another $1,000. Each qualifying spouse must make their catch-up contribution to their own HSA. Limits may be reduced for partial-year eligibility.
Contributions through a qualifying employer payroll arrangement generally avoid federal income and payroll taxes. Direct contributions generally provide a federal income tax deduction, but not payroll-tax savings. State income tax treatment may differ.
Withdrawals, including investment earnings, are federally tax- and penalty-free when used for qualified medical expenses. Unspent balances remain yours indefinitely, including after a job change or retirement, and can fund qualified expenses even when you are no longer eligible to contribute.
Expenses generally must be incurred after the HSA was established and cannot be reimbursed elsewhere or claimed as an itemized medical deduction. Keep records to support tax-free withdrawals.
If your finances allow, contributing while eligible and paying current medical bills from other funds can leave more money invested for potential tax-free growth. Consider your cash needs and investment risk before using this strategy.
Save on taxes with a flexible spending account
An employer-sponsored flexible spending account, or FSA, lets you set aside money for eligible expenses. Contributions generally avoid federal income, Social Security, and Medicare taxes, and often state and local income taxes. Your savings depend on your tax rates and eligibility.
Health FSAs
For plan years beginning in 2026, the federal limit on employee pretax contributions is $3,400. Employers may set lower limits. Check enrollment materials for the applicable 2027 amount.
Funds can pay qualified medical, dental, and vision expenses not reimbursed by insurance.
General-purpose health FSA coverage generally prevents HSA contributions while that coverage is in effect. This can include a spouse’s FSA that can reimburse your expenses, even if you never use it.
An HSA-compatible limited-purpose FSA (typically for dental and vision expenses) or a qualifying post-deductible FSA may allow contributions to both accounts. A dependent-care FSA does not affect HSA eligibility.
Dependent-care FSAs
Dependent-care FSAs are not just for child care. They may also cover eligible care for a spouse, parent, grandparent, or other qualifying adult who is incapable of self-care and lives with you for more than half the year. Dependency and work-related care requirements also apply.
You may set aside up to $7,500 annually, or $3,750 if married filing separately, subject to your employer’s plan limit. For married couples filing jointly, the $7,500 limit generally covers combined dependent-care benefits, including employer contributions.
Your tax-free amount may be lower based on your earned income and your spouse’s. Care generally must enable you and your spouse to work or look for work, with special rules for a spouse who is a full-time student or incapable of self-care.
Eligible care can include:
- Care for qualifying children under age 13, or a qualifying spouse or dependent who is incapable of self-care.
- Day care, preschool, before- and after-school care, and day camp.
For qualifying adults receiving care outside your home, the person generally must also regularly spend at least eight hours a day in your home.
Overnight camp and kindergarten tuition do not qualify. Expenses paid with tax-free benefits cannot also support a child and dependent care tax credit.
Understand spending deadlines
FSAs generally follow a use-it-or-lose-it rule. A health FSA may offer a carryover of up to $680 for plan years beginning in 2026 or a grace period of up to 2½ months, but not both.
Dependent-care FSAs do not qualify for that carryover provision, although they may still offer a grace period.
Check deadlines for receiving eligible care and submitting claims. Extra time to submit claims does not necessarily extend the time to incur expenses.
Review dental and vision coverage
Next, consider benefits that help manage other expenses.
For dental coverage, compare premiums, deductibles, networks, and your share of preventive services, fillings, and major procedures. The annual benefit maximum limits what the insurer pays, unlike a medical out-of-pocket maximum, which limits your cost sharing for covered in-network services. Check waiting periods, too.
For vision coverage, review exam benefits, eyewear allowances, copays, and how often benefits apply. Compare premiums and expected expenses with what you would otherwise pay.
Revisit your life insurance needs
Consider what your survivors would need for debts, education expenses, and replacing your income. Review workplace coverage alongside individual policies to identify gaps.
Confirm what happens if you change jobs or retire. You may be able to continue or convert coverage, subject to requirements and deadlines.
Review primary and contingent beneficiaries after family changes.
Employer-provided group-term life insurance above $50,000 can create taxable income based on the IRS-calculated cost of excess coverage, not the full death benefit.
Protect your income with disability insurance
Disability insurance can replace part of your income if a covered illness or injury prevents you from working.
Compare the income percentage replaced, maximum monthly benefit, waiting period, and benefit duration. Also understand the definition of disability and any exclusions or limitations.
Benefits generally are taxable when premiums were employer-paid or paid with pretax dollars. Benefits attributable to premiums you paid with after-tax dollars generally are federally tax-free.
Consider whether the amount you would actually receive, together with emergency savings, could support your household during an extended absence.
Explore your other benefits
Some employers offer student-loan assistance through qualifying educational-assistance programs. For 2026, the tax-free limit is $5,250 per employee for combined eligible educational assistance, including qualifying student-loan payments. It is not a separate loan-repayment allowance. Inflation indexing begins in 2027, so confirm the applicable amount.
Other offerings may include long-term care insurance, pet insurance, financial counseling, fitness discounts, and wellness incentives. Compare voluntary insurance with outside alternatives and look for useful programs you may have overlooked.
Make your choices count
Your benefits are part of your financial plan, not just annual enrollment forms. Before the deadline, ask: What has changed? What will each option cost? Where do you need additional protection?
Thoughtful answers can help you choose benefits that support everyday needs and longer-term goals.
Please reach out if you would like help evaluating how your choices fit into your broader financial plan.
Sam H. Fawaz CFP®, CPA, PFS is the President of YDream Financial Services, Inc., a fee-only investment advisory and financial planning firm serving the entire United States. If you would like to review your current investment portfolio or discuss retirement, college, tax, or other financial planning matters, please contact us or visit our website at http://www.ydfs.com. We are a fiduciary financial planning firm that always puts your interests first and has no products to sell. If you are not a client, an initial consultation is complimentary, with no pressure or hidden sales pitch. We begin with a thorough assessment of your unique personal situation. There is no rush and no cookie-cutter approach. Each client’s financial plan and investment objectives are unique.
