by Christian Hudspeth, CFP®
As sure as the changing leaves, Fall means it’s open enrollment season again in Corporate America!
Yes, some of you may dread the thought of slogging through HR forms again. But we see open enrollment as a prime opportunity to maximize your employer benefits, minimize lifetime taxation and put your financial goals into action.
Simply put, the difference between ignoring your employers’ offered benefits and taking just 30 minutes to give them a look could mean tens of thousands of dollars in wealth-building opportunity if done right.
That’s why today we’re reviewing five overlooked employer benefits that you can start taking advantage of today to supercharge your paychecks now – through employer perks and tax savings – and in retirement.
1. Your Employer Retirement Plan and “Free Money” Match
Are you taking full advantage of your employer’s retirement plan? Pre-tax retirement plans can offer significant tax savings for those in higher tax brackets. And many employers offer a contribution match (3% to 6% or more of your salary) in exchange for you contributing a certain percentage of your paycheck into your retirement plan such as a 401k, 403b, or SIMPLE IRA.
Let’s say your salary is $200,000 per year and your employer offers a match of 4% of your salary if you put in 5%. That means if you contribute $833 per month ($10,000 per year), your employer will add another $667 per month (or $8,000 per year) to your retirement plan.
That would be like getting an 80% return ($8,000 match for $10,000 investment) on your money before even considering the future investment growth! And depending on your employer’s vesting schedule, that “free” money will belong to you in one to six years.
Potential Benefits
- $1,000 to $3,700 per year in taxes deferred for every $10,000 in pre-tax contributions, given a 10% to 37% tax bracket.
- $300 to $600 per year in employer match dollars for every $10,000 contributed given a 3% to 6% of salary match.
Further reading: What Is An Employer’s 401(k) Match? – Forbes Advisor
2. Employee Stock Purchase Plans (ESPPs)
Employers offering ESPPs allow employees to buy company stock at a discount, typically between 5% to 15%. If you were to sell the shares immediately, that discount serves as an immediate short-term gain or return of 5% to 15%.
While ESPP contributions are made with your after-tax dollars (i.e. no Federal tax deduction) , you can still save on payroll taxes as ESPP contributions from your paycheck are not subject to Medicare and Social Security taxes. Depending on your employer, you may contribute up to $25,000 per year into your ESPP.
Potential Benefits
- Up to $1,912 per year in payroll tax savings, given 6.2% Social Security tax and 1.45% Medicare tax on a contribution of $25,000.
- Up to $4,412 in short-term capital gain* if you were to buy shares at a 15% discount on a $25,000 contribution and sell them as soon as available that same year, not counting investment gains or losses.
*The 15% discount on shares means that a $25,000 contribution yields a $4,412 short-term gain ($25,000 / (1-0.15) = $29,412 – $25,000 = $4,412) if they were to be sold immediately.
3. Flexible Spending Accounts (FSAs)
FSAs are tax-advantaged accounts that let you defer your income and therefore can save you money on associated income tax AND payroll taxes. And if used for specific kinds of expenses, withdrawals from FSAs are not taxed either.
The catch is, you must use your FSA funds in the same tax year as you contribute to the account or you forfeit the remaining balance. This “use-it-or-lose-it” rule means it’s best to contribute an amount you’ll realistically use to avoid overfunding your FSA.
Here are four common types of FSAs employers offer, and their contribution/deferral limits (as of 2025):
Healthcare FSAs (used instead of HSAs): $3,300 per year
Limited Purpose FSAs (for dental/vision expenses, used alongside an HSA): $3,300 per year
Dependent Care FSAs (used for child care, after-school care, or adult care expenses): $5,000 per year
Commuter FSAs (used for parking or mass transit expenses): $3,900 per year
Potential Benefits
- $252 to $383 per year in payroll tax savings, given FSA contributions of $3,300 to $5,000 taxed at the 7.65% Social Security/Medicare tax rate.
- $330 to $1,850 per year in income tax savings on the same contribution amounts depending on your tax bracket (10% to 37%).
Planning Tip: Do you spend more than $5,000 per year on childcare expenses? Ask your advisor about how to use a Dependent Care FSA in addition to the Child and Dependent Care Tax Credit.
Further reading: 3 Key Types of Flexible Spending Accounts (FSA) | Lively
4. After-Tax 401k Contributions / In-Plan Roth conversions
Have you maxed out your annual pre-tax 401k or 403b contributions and still want to save more for your retirement? Instead of investing in a taxable brokerage account (which is subject to capital gains taxes and taxable dividends), and if your employers’ retirement plan allows, you may be able to contribute more to your retirement account with after-tax contributions.
If your employers’ plan offers “in-plan Roth conversions” (ask your HR department for your 401k plan “Summary Plan Description”), you may be able to convert those after-tax funds each year into Roth 401k dollars. These converted dollars become Roth 401k funds that grow tax free for life and can be withdrawn without incurring income taxes if certain IRS conditions are met (talk with your advisor).
Potential Benefits
- Shelter investment growth and dividends from being subject to short-term capital gains tax or ordinary income tax rates up to 37%.
- Avoid long-term capital gains tax of 15% or 20%, and net income investment tax (NIIT) of 3.8% each year, based on your current taxable income.
Note: If you choose to contribute after-tax dollars into your employers’ retirement plan, be sure you won’t need access to those funds before retirement, as withdrawals may be subject to taxes and penalties if taken before age 59.5. Check with your financial advisor to see if this or a taxable brokerage account might be the right path to take given your unique goals before and after retirement.
5. Health Savings Accounts (HSA-HDHP)
Your employer may offer a High-Deductible Healthcare Plan (HDHP) tied to a Health Savings Account (HSA). While the deductibles on HDHP plans can be much higher than the familiar Preferred Provider Organization (PPO) plans (hence the name), HDHP plans typically come with lower monthly premiums, tax-deferred HSA contributions, and employer contributions (free money) to your HSA.
Potential Benefits
- 11% lower premiums than PPO plans on average for family coverage according to Kaiser Family Foundation.
- $669 per year in payroll tax savings (Social Security and Medicare tax) if you contribute $8,750 in 2026 to an HSA with family coverage.
- $875 to $3,237 in income tax savings on an $8,750 contribution, depending on your tax bracket.
- Tax-free growth and tax-free withdrawals on qualified medical expenses.
- Some employers contribute to the HSA plan as well.
- After age 65, you can take non-medical withdrawals from an HSA without penalty and use it like a traditional IRA.
Note: HSAs may not always be the best choice for families with more medical needs. Work with a financial planner to review which medical plan best suits your needs.
Further Reading: Understanding Health Savings Accounts (HSAs): Benefits, Rules & Limits (Investopedia)
Your next step…
Do yourself a favor — don’t squander this opportunity you’ve had through your employer. Taking 30 minutes to review your employee benefits manual and working with a trusted financial advisor to help you prioritize your financial goals can help you realize thousands of dollars in tax savings and employer benefits in just one year. And tens of thousands dollars more in tax savings over your lifetime.
Take advantage and choose your benefits wisely. You’ll thank yourself later!
Have a question about your employers’ benefits or other money topics that may impact you? Reach out to the author at chudspeth@fmpwa.com.
*The information presented here is not specific to any individual’s personal circumstances. FMP Wealth Advisers is not providing investment, tax, legal, or retirement advice or recommendations in this article.
**To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
***These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
