“It’s the most wonderful time of the year!” No, not Christmas – Open Enrollment! For CarMax employees it’s time to make some big financial decisions. In an attempt to make the selection process easier (and help you make better financial decisions) I’ve created a summary of what you need to know and think about as you navigate CarMax Open Enrollment 2019.

For the record, I assume you have at least reviewed the CarMax 2019 Open Enrollment booklet. Let’s dive in.

1. CarMax Group Health Insurance Options

First, use the ALEX tool CarMax provides you to get an initial view of what is being offered and what might work best for you. ALEX worked well for us last year, but we also had an unusually healthy year. Your choices are similar to last year but they have new names, PPO (highest premium, lowest out of pocket), the HSA Plan (lower premium, higher out of pocket), and the HRA Plan (lowest premium, higher out of pocket).

If you have ongoing health issues, are planning on getting pregnant, have little kids, and/or aren’t able to save money in the Healthcare Savings Account to cover medical costs, then you should probably look really hard at the traditional PPO medical plan, even though the bi-weekly premium costs are higher.

The riskiest combinations I can think of are to choose the HSA plan to save money on premiums but then to skip funding the Healthcare Savings Account. Or to select the HRA plan and not save anything in the Healthcare FSA.

Don’t do this.

Choosing the HSA option but not funding a Healthcare Savings Account exposes you to excessive risk and suggests that you don’t the financial security to pursue the HSA plan right now. Ditto for the HRA/FSA combo.

An HSA is not a great option for everyone. However, if you are trying to decide between the HSA and HRA keep reading. If you’ve already mentally selected the PPO skip to number 2.

What’s the difference between an HSA and an HRA?

HRA: Employer owned (CarMax), only the employer can contribute, the employer controls whether or not your funds can roll-over from year to year (under current CarMax rules you can as long as you continue to participate in the HRA plan).

HSA: Employee owned (you), you and the employer can contribute, funds can stay in the account indefinitely, and can grow tax-free in the account, making this another tax-preferenced retirement account for high income earners.

The HRA is a nice complement to the HRA plan but I don’t find it particularly compelling. Honestly, I have mixed feelings about HSAs. HSAs and High Deductible Healthcare Plans can add an additional level of financial risk for the average American family with little to no savings. If that’s you, think very hard about the PPO.

On the flip side, HSAs are great for people who can afford to max out their HSA contributions and ideally save their HSA accounts for the long-term by paying for their medical expenses out-of-pocket.

An HSA allows a single person to contribute $3,500/year ($300 from CarMax, $3,200 from you) or $7,000/year in 2019 for a family ($600 from CarMax and $6,400 from you). If you’re over age 55 you can make a $1,000 catch-up contribution as well. 

In fact, after capturing CarMax’s 401(k ) match of 100% on the first 6% of your pay contributed (*you must contribute in each pay period to get the maximum match), you should seriously consider turning your attention towards the HSA. Why?

Think of an HSA as a Roth IRA…on steroids.

With an HSA you get:

1. An income tax deduction on your contribution in the year you make it (or made with pre-tax dollars).
2. Assets can be invested within the HSA and grow tax-free while in the HSA.
3. Assets can be withdrawn for qualified medical expenses tax-free at any time.

(This is not tax advice. Talk to your CPA or tax preparer.)

You can calculate your potential tax savings using this simple calculator from HSA Bank.

http://www.hsabank.com/hsabank/learning-center/hsa-savings-calculator

Can I just say, I seriously love this calculator. It’s easy to use and has conservative return assumptions, and it allows you to assume you spend some of the HSA money every year. Things that make financial planners happy…

Not sure what tax bracket you will be in for 2019? Take a quick look here.

Think Long-Term with HSAs

The key here is to treat the HSA as a long-term savings vehicle. Leave a certain amount in cash for a medical emergency, but consider investing your HSA assets for retirement as well. Or, plan to pay your medical expenses out of monthly cash flow if at all possible. Talk to a fiduciary financial planner for a personalized recommendation.

Remember, you always own the HSA. You can move the money to another HSA provider and invest it as you see fit if you are not happy with your current investment options. However, if you want the CarMax contribution to your HSA (you do), you have to at least enroll in the CarMax HSA account in order to receive the contribution.

*** You MUST enroll in the the CarMax HSA in order to receive the CarMax contribution.***

Now you might be thinking…

But, the HRA plan is really cheap for Associate-Only coverage

True, the HRA plan premiums are significantly cheaper than the HSA plan for a single employee. Like the HSA, CarMax will also contribute $300 for a single Associate or $600 for an Associate with a partner or family to the HRA for you.

However, if you are healthy and able to maximize the Healthcare Savings Account contributions, long-term you may be better off with the HSA plan vs. the HRA Plan. Remember, the HSA plan has a compound interest miracle-working machine built in – if you take advantage of the Healthcare Savings Account. The HRA benefit is a one and done benefit in terms of premium savings.

Other people who might prefer the HRA

Important differences – if you take a lot of prescription drugs to manage ongoing medical issues and are not able to use generic versions of those drugs, then the HRA (or PPO) may be a better choice for you.

Also, if you plan on visiting the doctor online there’s no co-pay for HRA and PPO participants, but HSA plan participants will need to pay a $40 copay after they hit their deductible. This seems like an odd distinction, but it’s in your 2019 Open Enrollment kit.

2. Make Sure You Take Advantage Of The Medical Plan Credits

This is a no-brainer. Go in for the biometric screening offered at your work location or screening center and save $600/year for an Associate or $1,200 for you + your spouse/partner. You could do what we do and have an annual competition to see who “wins” when it comes to blood pressure and cholesterol.

Too competitive you say? You’ll change your tune when you WIN 3 years in a row!

Pro-tip: If your beloved gets crabby when they don’t eat, schedule them an early morning appointment. Those early spots fill up fast, so don’t delay! This is an act of love that will be truly appreciated.

3. CarMax Dental Plan

You only have one option. Just keep flossing.

4. CarMax Vision

If you order your contact lenses on contactdirect.com you get an extra $20 towards your contact allowance, bringing it up to $170/year. Shop around – my contacts were significantly cheaper elsewhere despite the extra discount.

5. Limited Purpose FSA vs. the Healthcare FSA

Looking to save even more money pre-tax for medical expenses? Consider using a Limited Purpose FSA or Healthcare FSA.

The Limited Purpose FSA can be used by people who are participating in an HSA and is only for vision and dental expenses. If you select the HSA plan and have vision or dental expenses consider putting a little money here to max out your tax savings.

Remember: you are capped at $500 for Limited FSA contributions, but under the current KMX benefit structure you can roll this money from year to year as long as you elect to continue participating.

Got an HSA? Don’t fund a Healthcare FSA

You cannot combine a Healthcare Flexible Spending Account (HCFSA) with a Healthcare Savings Account (HSA). Even if your spouse has healthcare coverage through their employer and elects to use an FSA, you cannot fund an HSA. So coordinate your benefit elections – I’ve seen this little known rule trip people up. You can only combine an HSA with a Limited Purpose FSA.

If you sign up for the HRA or PPO then you can contribute to the Healthcare Flexible Spending Account (HCFSA). In 2019 you can contribute up to $2,700 to this account (if you sign up for the HRA CarMax will contribute either $300 or $600 to the HRA as well).

However, like the LPFSA, you can only rollover $500 in the Healthcare FSA from year to year. Think carefully about your medical expenses and try to avoid over contributing by more than $500. (The $500 is a firm cap. You can’t roll over $500 in 2018 and then another $500 in 2019.)

Want to know more about the FSA? We’ve got a post for you (click here).

6. Dependent Care Flexible Spending Account

Have kids in daycare so you can work? Or perhaps your mom is in adult daycare (don’t laugh, it happens). Don’t skip this benefit. You can make up to a $5,000/year tax-deductible contribution to pay for qualifying dependent care expenses. Most parents already have a very good idea of what their annual childcare expenses will be, which makes this benefit an easy one to take advantage of.

***Make sure you have a Social Security Number or EIN for your daycare provider. If your nanny is taking her payments primarily in cash then this benefit is probably not for you.***

Have questions about Dependent Care FSAs? Lucky you, we’ve got another blog post here for you comparing HSAs and FSAs.  

And, a second post for parents with kids at home on FSAs.

Three Important Things To Know About Dependent Care FSAs

1) Dependent Care FSA money does not roll over from year to year. Use it or lose it.  

2) Dependent Care FSAs can not be used to pay for private school tuition (but your VA 529 can – click here).

3) You cannot take a Dependent Care FSA with you if you leave CarMax mid – year.

7. Long-Term Disability Insurance

Not much choice to make here, except whether or not to sign up. Sign up. It’s low cost and it can really help you and your family should you be seriously injured or fall ill.

Good luck making your benefit elections! I hope you found this summary helpful. Please comment below to let me know what other questions you may have about your CarMax employee benefits or finances in general.