A Guide For College Grads On Your Company Benefits Plan

Congratulations, Graduate!

“Find a job you enjoy doing, and you will never have to work a day in your life.”

Mark Twain

Hopefully, there will be a commencement season this year. It is one of my favorite times of the year, and I don’t even have a child going to college yet. As a professor and a hopeful nerd, I enjoy college grads getting all kinds of accolades and advice on life and read as many commencement speeches as I can. Some of those speeches through the years have become legendary.

For one of the most inspiring, read or listen to the commencement speech of Steve Jobs, co-founder of Apple, at Stanford University in 2005.

Enjoy This Moment of Sunshine

After years of toil at your college and most likely working hard in high school to land at your top college choice, you have earned the chance to enjoy this moment. The time between college and starting your first job is an excellent time to take a breather. And travel time to visit family, friends, and possibly part-time employment.

The value of obtaining your bachelor’s degree remains a significant factor in your lifelong income and financial well-being.

Your First Job After College

On average, most graduates believe the benefits of their education meet or exceed the costs. Likely you are either starting your first job soon or are engaged in your search.  According to its survey, the National Association of Colleges and Employers (NACE), the average annual salary for college grads is about $50,000. Those who majored in computers, engineering, mathematics, health sciences, and business were the highest earners, with salaries ranging between $52,000 and $71,000. 

 Tips For Making The Most Of Your First Job:

 

1. Perfection Is The Enemy Of The Good

You are beginning your professional life. You don’t know what to anticipate in your new environment. Expect to make mistakes and learn from them.

Prepare for your job interview for the job. Start by reading their annual report and articles to understand the company. Competence is what you are aiming for when you first get started in your new job.

2. Paying Your Dues

Initially, you are not likely to get the “cool” assignments. You will be doing a lot of the grunt work or doing something you believe is beneath you. Everyone goes through this feeling. Remain enthusiastic as your co-workers and boss may want to see how you handle the easy work before giving you more tasks.

3. Volunteer To Help Others But Complete Your Work

When I hired associates to work with me I often had “eager beavers” wanting to do everything everyone else was doing, leaving behind the work I asked them to complete. Instead, they would rush their work, doing a shabby job.

4. Seek Opportunities To Learn New Skills

As you get deeper into the swing of your job, complete tasks on or ahead of schedule, become a sponge. Learn as much as possible and take advantage of any company-sponsored training offered to you. Strengthen your existing skills and build your abilities to be a problem solver. 

 5. Do More Than Asked

I heard a great story from a now successful executive at a major newspaper firm. She elevated herself from the entry-level job, by completing her work efficiently, then helping others.  Along the way, she picked essential skills to make herself invaluable. As a result, she is now a senior manager of the firm.

6. Understand Your Company Benefits Package

According to the Bureau of Labor Statistics, the combined benefits plan adds about 30% to your total compensation. In a tight employment market, companies often become more generous with their benefits. Besides the standard vacation days, your benefits package may vary widely.

A recent Glassdoor survey said 4 out of 5 employees prefer benefits to a raise.

Your Company Benefits Package:

 

Retirement 401K Plan

As soon as you begin to work at your new firm, you need to set up an account to start saving in your 401K plan. Better yet, automate contributions directly from your paycheck. You need to understand the dollar amount or percentage of company matching contribution with any defined cap amounts on employee contribution.

For example, Discover, the credit card company, has a generous company match up to 7%.

What is the vesting period of the company’s matching contribution for the 401K? If vesting is partial or two years, you will more likely keep the company’s match amount than if the vesting period is 5 years or more. Many companies have partial vesting.

As this is your first job, you may not expect to stay the five years required to earn the company’s contribution. People no longer stay in the same company for years. However, you should still begin to put money in your 401K. If you leave your job, you have options for your 401K. You can leave it in the old plan or roll it over to your new employer or roll this 401K into an IRA. 

Student Loans Repayment

Student loan repayment as an employee benefit is in its infancy period. It could grow into a core part of a company’s benefits package. According to SHRM’s 2019 survey, about 8% of employers repay student loans as an attractive benefit.

More companies are helping with student loans, especially since the IRS ruling a few years back. Abbott Laboratories was a pioneer in addressing student loan repayments giving employees the option. Employees can contribute toward their student debt rather than to the 401K plan. However, they still get the 401K employer’s match contribution even if the worker didn’t contribute themselves.

Company Stock Ownership Plans Differ Widely

They are a desirable benefit for the employees to participate in the company’s growth and may offer tax deductions.

For closely-held or private corporations, Employee Stock Option Plans or ESOPs means that the company is owned partly or entirely by employees. Publix, the supermarket company, is among the largest owned.

Employee Stock Purchase Plans or ESPPs are offered by 52% of most public corporations through employee participation is relatively low at 42%.

The ESPP plan is usually offered as a tax-qualified plan. All employees may participate based on a minimum number of years at the company. These employees may buy stock during “an offering period” over  3 months-to-27 months, set at a discount up to 15% from the market price.

Employees can profit immediately or over a longer holding period. If holding more than a year and a day, your income is taxed at the capital gains rate. Make sure you diversify your investment portfolio beyond holding any concentrated positions.

A Word of Caution

Sometimes employees can expand their stock ownership on a tax-advantaged basis, even buying the shares inside their 401K plans. I have significant concerns about employees using their employer’s stock in their 401k for three main reasons:

  • Owning too much stock of the company you are working for is too much risk no matter how great the company is as your employer. Too many eggs in one basket are hazardous, and you need diversification.
  • WorldCom and Enron’s financial scandals were devastating for those company employees who received an excessive amount of compensation in their company stock for bonuses and 401K plans. There was little heads up of the calamity coming.
  • Many lost their life savings along with the devaluation of their homes due to their proximity to corporate headquarters. I knew many of the WorldCom folks.

 Health Insurance

Not surprisingly, 58% of new college grads want 100% employer-paid medical insurance but only 7.5% of employers provide that. You need to understand the premiums, deductibles, and co-pays you are responsible for and your plan covers.

HSAs

If there is a high deductible, determine whether your employer contributes to health savings accounts (HSAs). An HSA is a tax-advantaged account for individuals covered by high deductibles, not subject to federal income tax at the time of deposits.  HSA funds are used to pay for qualified medical expenses and may cover over-the-counter medications with a doctor’s prescription.

FSAs – Health Care Flexible Spending Plans 

 A flex plan allows employees to pay for specific unreimbursed healthcare and dependent care expenses with pretax dollars. This plan helps to offset some of the costs not met with the main health insurance up to a capped amount (e.g., $2,000).

Dental and Vision insurance is offered by about 62% of employers and is considered a desirable perk for college grads. Vision insurance is part of the more significant health insurance, allowing regular eye exams and some employer contribution for glasses.

Disability Insurance

According to Social Security Administration, 25% of all 20-year-olds will be disabled by the age of 67. Disability insurance is an essential part of any package, but few believe they need this insurance. 42% of private sector companies offer this insurance.

This insurance plan replaces a portion of an employee’s gross income, usually up to 50%-60% to you, while you are disabled subject to a physician’s approval. You buy this insurance on a short-term and long-term basis. The employer may pay the premium in part or in whole. The employee will pay the rest.

On a short-term basis, the disability benefits extend up to 52 weeks, kicking in 1-14 days after the employee cannot work and has applied their sick days.

Life Insurance 

Usually, employers offer a relatively small amount of life insurance rather than enough to protect you and your family fully. The employee can increase its coverage amount by paying the premiums on a monthly or quarterly basis through its company’s group term life plan at reduced rates than what they would pay on their own.

Tuition Reimbursement 

Most employers are often willing to provide tuition reimbursement for advanced education rather than lose the employee. The refund can correlate to grades. An “A” would 100% reimbursement, “B” gets 75%, and so on.

Increasingly, companies are offering online courses to employees to complete their degrees for high school and college, as well as “English as a Second Language.”

Unique Lifestyle Benefits  

There is a long list of excellent benefits often found to be high quality among the best companies. Flexible work options are becoming more standard after given the broad experience many have had during the pandemic. Here are some of the best I found:

  • egg freezing for female employees
  • adoption and surrogacy assistance and reimbursement
  • employee relief fund for national disaster victims
  • doctor’s office or medical clinic onsite
  •  counseling sessions to reduce stress
  • high-quality dining
  • leave of absences to care for family members or newborns
  • financial aid coaches
  •  career planning
  • discounts or full paid courses for high school, undergraduate degrees, yoga, and ESL
  • flex hours or work from home
  • dry cleaning on-premises
  • paid time off for volunteering
  • pet insurance
  • onsite gym
  • personal or professional time off
  • child daycare or  day elder care

Maybe There Is A Free Lunch

Take advantage of your company benefits plan by reading it thoroughly. Ask questions of human resources to understand it better. Work diligently and convey a positive attitude. Whether this is your first job or your fifth job, your company benefits package is a meaningful part of your compensation.

Thank you for reading! What is in your company benefits package? What are the benefits you value the most? Please share your thoughts with us!

 

 

 

 

 

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