Jeff Weeks, CFP (Certified Financial Planner) | ATX Portfolio Advisors | TexAgs
How much time will you spend studying the Aggies' depth chart this fall compared with your employee benefits? I am all for a little football analysis, but your benefits probably deserve more attention than clicking "same as last year" between possessions. A few choices in the human resources portal can affect your taxes, medical bills, and the income your family would have if you could not work.
Here is what I would review before submitting your company's open enrollment elections. If both spouses have benefits, put the two packages next to each other. The best combination for your household may involve different choices at each employer.
1. Look Beyond the Health Insurance Premium
Compare annual premiums, deductibles, the maximum you would pay for covered care within the network, and any employer health savings account (HSA) contribution. Confirm that your doctors and prescriptions are covered. Run the numbers for a routine year and an expensive year, then consider whether your cash reserve could handle a large bill early in the year.
For example, a hypothetical plan with $6,000 in premiums, an $8,000 family spending maximum, and $1,500 in employer HSA funding produces a $12,500 combined cost when you reach the maximum. Another plan with $9,000 in premiums, a $5,000 maximum, and no employer funding produces a $14,000 cost. Those figures exclude tax effects and expenses beyond the covered care limits, but they show why the deductible alone does not settle the decision.
2. Invest the Health Savings Account for Future Expenses
For 2027, HSA contribution limits are $4,500 for individual coverage and $9,000 for family coverage, including employer deposits. Eligible people age 55 or older can add $1,000. Each spouse's additional contribution belongs in that spouse's own account.
An HSA is potentially the most tax favored investment vehicle available under federal law. Eligible payroll contributions through an employer's cafeteria plan generally avoid federal income tax and Federal Insurance Contributions Act (FICA) taxes, which fund Social Security and Medicare. Growth and withdrawals for qualified medical expenses are federally tax free. Direct personal contributions generally earn an income tax deduction without recovering payroll taxes already paid.
If cash flow allows, pay current medical bills from other resources, invest the HSA for long term growth, and save the receipts. Keep itemized bills, proof of payment, and a record of reimbursements. There is no federal time limit for reimbursing qualifying expenses incurred after the account was established, provided they were not previously reimbursed or deducted. Saving those records can preserve the ability to make tax free withdrawals years later while the balance compounds.
Confirm eligibility before contributing: a spouse's general purpose health flexible spending arrangement (FSA) covering your expenses or Medicare enrollment can prevent HSA contributions. Check transitions from an existing FSA, too. Keep funds needed for anticipated bills accessible and invest the remainder according to your time horizon and risk tolerance.
3. Fund Spending Accounts for Expenses You Expect
Base a health FSA election on predictable expenses such as prescriptions, dental work, and vision care. Check the plan's carryover or grace period provisions and its claim deadlines. A tax break loses its appeal when unused money is forfeited.
The federal dependent care exclusion increased to $7,500 beginning in 2026, or $3,750 for married taxpayers filing separately. Your employer's plan may allow less, and eligibility rules still apply. Coordinate both spouses' elections and compare the exclusion with the dependent care tax credit, since excluded benefits reduce expenses available for the credit.
4. Check What Disability and Life Insurance Would Pay
For disability coverage, review the monthly cap, waiting period, benefit duration, and definition of disability. Then calculate the income available after any applicable taxes. Benefits attributable to employer paid or pretax premiums generally are taxable; coverage paid entirely with money already taxed generally produces benefits that are not taxable.
Life insurance needs a dollar calculation, too. Consider your dependents' needs, debts, existing coverage, and assets available to support the family. Check underwriting requirements and what happens to the policy if you leave the company.
5. Explore the Mega Backdoor Roth 401(k)
Get the full employer match, then ask whether your plan supports the Mega Backdoor Roth 401(k). The plan must permit extra, non Roth after tax contributions and either conversion to its Roth account or eligible distributions while employed that can be rolled into a Roth individual retirement account (IRA). These extra contributions use remaining room under the overall annual contribution limit after regular employee contributions other than catchups and employer contributions, subject to plan restrictions. Checking the regular "Roth" payroll box does not accomplish this.
Ask about automatic or frequent conversions, which can limit earnings accumulating before the money reaches Roth. After tax contributions are not taxed again, but pretax earnings converted to Roth generally are taxable. This can be a valuable way to build additional savings with federally tax free qualified withdrawals when your cash flow supports it.
Review regular pretax versus Roth saving, match timing, and the Roth catchup requirement for certain higher earning employees. Confirm the applicable wage threshold and payroll treatment. Coordinate all contributions with the household budget and tax plan.
6. Weigh Stock Awards and Deferred Compensation Against Employer Risk
Restricted stock units (RSUs), stock purchase discounts, and nonqualified deferred compensation can be valuable benefits. They also tie more of your financial future to the company paying your salary. For RSUs, review vesting, tax withholding, and sale restrictions; share value generally becomes compensation income when delivered, commonly at vesting. Include both owned shares and conditional, unvested awards when assessing your dependence on the employer.
If the company paid your vested award in cash, would you use it to buy the stock? That question can help separate the value of the benefit from the decision to keep accumulating shares. Apply the same discipline to stock purchase plans, coordinating taxes and trading restrictions with a diversification policy.
Nonqualified deferred compensation can help manage the timing of income, but generally is an unsecured employer promise. Review deadlines, payment dates, liquidity restrictions, and the company's ability to pay. Weigh the tax opportunity against that credit exposure and your other employer related risks.
7. Make Sure the Elections Take Effect
Confirm dependents and beneficiaries, save the enrollment confirmation, and check the first applicable payroll deductions. Then update your household budget and financial plan. The election screen and the paycheck should tell the same story.
I would put this review on the calendar before the deadline email becomes urgent. A little attention now can help align your benefits with your family's actual needs. If you would like help connecting those decisions to your financial plan, get in touch through the ATX Portfolio Advisors contact page.
Principal
jeff.weeks@atxadvisors.com
(512) 537-5955
www.atxadvisors.com
How much time will you spend studying the Aggies' depth chart this fall compared with your employee benefits? I am all for a little football analysis, but your benefits probably deserve more attention than clicking "same as last year" between possessions. A few choices in the human resources portal can affect your taxes, medical bills, and the income your family would have if you could not work.
Here is what I would review before submitting your company's open enrollment elections. If both spouses have benefits, put the two packages next to each other. The best combination for your household may involve different choices at each employer.
1. Look Beyond the Health Insurance Premium
Compare annual premiums, deductibles, the maximum you would pay for covered care within the network, and any employer health savings account (HSA) contribution. Confirm that your doctors and prescriptions are covered. Run the numbers for a routine year and an expensive year, then consider whether your cash reserve could handle a large bill early in the year.
For example, a hypothetical plan with $6,000 in premiums, an $8,000 family spending maximum, and $1,500 in employer HSA funding produces a $12,500 combined cost when you reach the maximum. Another plan with $9,000 in premiums, a $5,000 maximum, and no employer funding produces a $14,000 cost. Those figures exclude tax effects and expenses beyond the covered care limits, but they show why the deductible alone does not settle the decision.
2. Invest the Health Savings Account for Future Expenses
For 2027, HSA contribution limits are $4,500 for individual coverage and $9,000 for family coverage, including employer deposits. Eligible people age 55 or older can add $1,000. Each spouse's additional contribution belongs in that spouse's own account.
An HSA is potentially the most tax favored investment vehicle available under federal law. Eligible payroll contributions through an employer's cafeteria plan generally avoid federal income tax and Federal Insurance Contributions Act (FICA) taxes, which fund Social Security and Medicare. Growth and withdrawals for qualified medical expenses are federally tax free. Direct personal contributions generally earn an income tax deduction without recovering payroll taxes already paid.
If cash flow allows, pay current medical bills from other resources, invest the HSA for long term growth, and save the receipts. Keep itemized bills, proof of payment, and a record of reimbursements. There is no federal time limit for reimbursing qualifying expenses incurred after the account was established, provided they were not previously reimbursed or deducted. Saving those records can preserve the ability to make tax free withdrawals years later while the balance compounds.
Confirm eligibility before contributing: a spouse's general purpose health flexible spending arrangement (FSA) covering your expenses or Medicare enrollment can prevent HSA contributions. Check transitions from an existing FSA, too. Keep funds needed for anticipated bills accessible and invest the remainder according to your time horizon and risk tolerance.
3. Fund Spending Accounts for Expenses You Expect
Base a health FSA election on predictable expenses such as prescriptions, dental work, and vision care. Check the plan's carryover or grace period provisions and its claim deadlines. A tax break loses its appeal when unused money is forfeited.
The federal dependent care exclusion increased to $7,500 beginning in 2026, or $3,750 for married taxpayers filing separately. Your employer's plan may allow less, and eligibility rules still apply. Coordinate both spouses' elections and compare the exclusion with the dependent care tax credit, since excluded benefits reduce expenses available for the credit.
4. Check What Disability and Life Insurance Would Pay
For disability coverage, review the monthly cap, waiting period, benefit duration, and definition of disability. Then calculate the income available after any applicable taxes. Benefits attributable to employer paid or pretax premiums generally are taxable; coverage paid entirely with money already taxed generally produces benefits that are not taxable.
Life insurance needs a dollar calculation, too. Consider your dependents' needs, debts, existing coverage, and assets available to support the family. Check underwriting requirements and what happens to the policy if you leave the company.
5. Explore the Mega Backdoor Roth 401(k)
Get the full employer match, then ask whether your plan supports the Mega Backdoor Roth 401(k). The plan must permit extra, non Roth after tax contributions and either conversion to its Roth account or eligible distributions while employed that can be rolled into a Roth individual retirement account (IRA). These extra contributions use remaining room under the overall annual contribution limit after regular employee contributions other than catchups and employer contributions, subject to plan restrictions. Checking the regular "Roth" payroll box does not accomplish this.
Ask about automatic or frequent conversions, which can limit earnings accumulating before the money reaches Roth. After tax contributions are not taxed again, but pretax earnings converted to Roth generally are taxable. This can be a valuable way to build additional savings with federally tax free qualified withdrawals when your cash flow supports it.
Review regular pretax versus Roth saving, match timing, and the Roth catchup requirement for certain higher earning employees. Confirm the applicable wage threshold and payroll treatment. Coordinate all contributions with the household budget and tax plan.
6. Weigh Stock Awards and Deferred Compensation Against Employer Risk
Restricted stock units (RSUs), stock purchase discounts, and nonqualified deferred compensation can be valuable benefits. They also tie more of your financial future to the company paying your salary. For RSUs, review vesting, tax withholding, and sale restrictions; share value generally becomes compensation income when delivered, commonly at vesting. Include both owned shares and conditional, unvested awards when assessing your dependence on the employer.
If the company paid your vested award in cash, would you use it to buy the stock? That question can help separate the value of the benefit from the decision to keep accumulating shares. Apply the same discipline to stock purchase plans, coordinating taxes and trading restrictions with a diversification policy.
Nonqualified deferred compensation can help manage the timing of income, but generally is an unsecured employer promise. Review deadlines, payment dates, liquidity restrictions, and the company's ability to pay. Weigh the tax opportunity against that credit exposure and your other employer related risks.
7. Make Sure the Elections Take Effect
Confirm dependents and beneficiaries, save the enrollment confirmation, and check the first applicable payroll deductions. Then update your household budget and financial plan. The election screen and the paycheck should tell the same story.
I would put this review on the calendar before the deadline email becomes urgent. A little attention now can help align your benefits with your family's actual needs. If you would like help connecting those decisions to your financial plan, get in touch through the ATX Portfolio Advisors contact page.
Principal
jeff.weeks@atxadvisors.com
(512) 537-5955
www.atxadvisors.com