Saturday, January 20, 2018
Business

Calculate your benefits' worth to evaluate the offer

The best way to put a dollar value on benefits as part of a job offer is to ask the prospective employer to do it for you, says management expert Lonnie Pacelli, author of The Project Management Advisor.

Jim Greeley, director of career services at Merrimack College in North Andover, Mass., acknowledges that might make you nervous, as it should without an offer in hand. "But with an offer, it's a totally reasonable question," he says.

Benefits could be worth a few thousand dollars as part of your total compensation package. Consider the two most common benefits offered to new college grads: health insurance and retirement plans.

A healthy difference

You may be so desperate for health insurance that when you finally get an offer, you don't take the time to analyze its attached health plan. But that could cost you.

Suppose hypothetical Job A pays $30,000 plus health benefits, while Job B comes in at $32,000 plus health benefits.

A no-brainer? Not necessarily. Suppose the Job A employer covers 100 percent of your monthly health insurance premium and that the insurance plan's annual deductible, or out-of-pocket amount you'll pay for medical care before insurance kicks in, is $500. Job B employer covers 80 percent of your monthly health insurance premium, with the rest, $200 per month, deducted from your paycheck. The annual deductible is $1,000.

Do the math:

Job A: With a $30,000 salary and no annual cost for health insurance, your net salary is $30,000.

Job B: With a $32,000 salary and your annual cost for health insurance at $2,400 ($200/month times 12 months), your net salary is $29,600 ($32,000 minus $2,400).

And if you spend $500 out of pocket the first year on doctor's visits, Job A's net salary drops to $29,500 ($30,000 net salary minus your $500 deductible). Net salary for Job B falls to $29,100 ($29,600 net salary minus $500 of your $1,000 deductible) and will drop up to $500 more if you have additional health problems.

These insurance concepts "may not seem important to a recent college graduate who hasn't been sick a day in his or her life," says Roberta Chinsky Matuson, principal of Human Resource Solutions in Northampton, Mass. "But ask anyone who has been stricken by illness how quickly medical expenses add up, even with health insurance."

Less now, more later

You can run into a similar counterintuitive scenario with commonly offered retirement plans like the 401k and 403b.

What's the difference between them? A 401k lets you invest in any publicly traded securities, mutual funds and options. The 403b limits you to annuity contracts, mutual funds and money-market funds.

Take the same two hypothetical jobs, Job A and its $30,000 salary and Job B with its $32,000 salary. Job A offers a 401k plan that lets you contribute up to $2,500 a year toward retirement. And the company will match your contributions starting on day one.

Job B offers a 403b plan that allows you to put in up to $1,000 a year toward retirement. The organization will match 50 percent after a year.

Imagine you put the maximum amount of money possible into your retirement plan the first year:

Job A: Based on a $30,000 salary, if you set aside $2,500 for retirement, plus a $2,500 employer match, your net salary would be $32,500.

Job B: Based on a $32,000 salary, if you set aside nothing for retirement, your net salary would be $32,000.

So it pays to ask for specific numbers for health insurance, retirement plans and other benefits when evaluating an offer. And if the employer won't give you the information, do you really want to work there?

"Obviously the employer can choose not to give [financial information on benefits]," says Pacelli.

"But if they're really trying to sell you on coming to the company, they may see it as a sales tool to show you the total value of the package."

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