Open Enrollment at Amazon runs from February 10th, 2021 to March 3rd, 2021. The following is a summary of elections to consider. As always, please reach out to your Paracle advisor if you have specific questions.
What’s New and What’s Changing
Here are a few important changes coming for 2021:
- The Health Savings Account (HSA) administrator will change from Connect Your Care/HSA Bank to Fidelity on April 1st.
- The Enhanced Dental Plan will pay more toward eligible care.
- The vision plans will cover more towards contact lens fittings and exams.
- Mental health benefits will be expanded on April 1st.
- If you don’t enroll or make changes during Open Enrollment, your current benefits (except FSA elections) will roll over to next year at the new rates.
- If you have a 2020 Flexible Spending Account (FSA) and want an FSA for 2021, you must enroll in a new one during Open Enrollment – these accounts don’t roll over year to year.
During Open Enrollment, you may elect which health plan will be best for you in the coming year. This is a very personal choice dependent on your options of health care providers and your specific medical needs. There are five comprehensive plans to choose from, including a Shared Deductible Plan, Standard Plan, Health Savings Plan (HSA)*, In-Network Only Plan, and Kaiser HMO.
The HSA plan has a high deductible but is the only plan that allows you to invest contributions from you and the employer and use the funds even after you leave Amazon. This could be a strategy for you to save for retirement healthcare costs.
The 2021 contribution limits for the HSA are $3,600 for employee-only coverage, or $7,200 for a family of 2 or more. The annual limits are inclusive of the employer contributions; for 2021, Amazon will pay $500 for employee only, $1,000 for employee plus spouse or child, and maximum of $1,500 for a family of 3 or more. The employer contributions are the same for the Shared Deductible Plan.
*If you use the Health Savings Account, please note the accounts are being moved to Fidelity and as part of your Open Enrollment, you must take action to authorize Fidelity to open an HSA for you. If you have existing funds in an HSA at Connect Your Care, you will also need to approve the transfer of your funds during Open Enrollment.
Flexible Spending Accounts
You must make your annual selection if you want to contribute to one of the Flexible Spending Accounts. Unlike most of the other elections, this one does not carry-forward from last year. Amazon offers a Health Care FSA (if you do not participate in the HSA) and a Dependent Care FSA, which can be used for certain childcare expenses or for senior citizens who live with you and are claimed as dependents on your tax return. The Health Care FSA can be a tax-efficient way to pay for large, planned out-of-pocket expenses (like orthodontia) with pre-tax dollars. The max contribution for 2021 is $2,750. The Dependent Care contribution limit is $5,000 but is reduced to $575 if you earned more than $125k in 2020.
During Open Enrollment, you can add or change your group life insurance coverage. Amazon pays for coverage equal to 2x annual base salary, but you can elect to add coverage up to 10x pay (with a $2M maximum). This is an easy way to obtain life insurance, but it is not always the most cost-effective option and is not portable. An exam may be required for levels of coverage over $500k or for 4x-10x your base salary.
MetLaw Legal Plan
These plans can be beneficial for a variety of legal needs, including identity theft defense, traffic offenses, real estate, estate plans, and other personal or family legal matters. In our experience, group legal plans are not sufficient for managing more complex legal matters or detailed estate planning services.
Amazon offers a couple of supplemental insurance plans that would pay a lump-sum directly to you in the case of a covered event (Accident or Critical Illness). These differ from your medical or disability insurance in that the benefit is paid directly to you, and you can use the funds for any type of expenses.
The new 401(k) annual contribution limit for 2021 is $19,500 (plus $6,500 for anyone over the age of 50). Amazon offers pre-tax and Roth contributions, and matches contributions up to 4% of your annual pay. You can also contribute an additional 10% of your salary each year to the after-tax 401(k) and then convert that amount to a Roth inside the plan with little to no tax impact where it will grow tax-free.
We recommend that you max-out contributions to the 401(k) each year. Note that highly compensated employees will have some of the contributions refunded each year because the Amazon plan is considered “top-heavy.”
Reviewing Your Elections
As you can see, Amazon employees enjoy a wide range of financial benefits. If you have questions about which elections are right for you or how they best fit with your tax and financial planning, your Paracle advisor can help.
Paracle Personal Financial Management is an independent financial planning firm founded in 2004 with an honest desire to help people optimize their finances by providing unbiased financial planning and investment advice that puts their clients first. Paracle specializes in delivering expert, comprehensive wealth management services to busy families. Their expertise integrates financial planning with investment management to ensure their clients experience confidence in every aspect of their plan so they can focus on what matters most. To learn more about Paracle, connect with them on LinkedIn.