Open Enrollment and Estate Planning: Why You Should Review Your Beneficiary Designations

Fall, generally late October or early November, is when many employers send employees information about their benefits and provide an opportunity to enrol or make changes. These benefits may include retirement plans, health care, dental and vision coverage, short- and long-term disability insurance, and life insurance.

Your employer may pay all of the premiums, share the cost with you, or require you to pay the premiums yourself. Open enrollment is also an important opportunity to review your beneficiary designations and make sure your employee benefits continue to work with your overall estate plan.

Below are several considerations to keep in mind when open enrollment begins.

Open Enrollment Benefits to Review

When reviewing your employee benefits during open enrollment, consider more than the cost of each benefit. You should also consider how each benefit fits into your financial and estate planning goals.

• Retirement plan contributions and available tax treatment
• Employer matching contributions
• Health care, dental and vision coverage
• Health Savings Account (HSA) options
• Life insurance coverage
• Short- and long-term disability coverage
• Beneficiary designations for applicable accounts and policies

Reviewing these benefits each year can help you identify changes that may affect your finances, insurance coverage, and estate plan.

Employee Benefits Explained

Retirement Plans

When considering an employer-sponsored retirement plan, such as a 401(k), 403(b), or governmental 457(b) plan, review how much you want to contribute and whether the plan offers pre-tax or Roth contributions.

The tax treatment and contribution limits depend on the type of plan and your individual circumstances. The IRS provides information about retirement plan contributions and applicable limits.

You should also check whether your employer offers matching contributions. Taking advantage of an available employer match can help increase your retirement savings.

Your beneficiary designation is another important consideration. Retirement accounts can represent a significant part of an estate, so the person or entity you name should be considered as part of your broader estate plan.

For more information about retirement accounts, beneficiaries, and recent changes to retirement rules, see our guide to retirement accounts and beneficiaries.

Health Care and Health Savings Accounts

Healthcare benefits may include health, vision, and dental coverage, as well as access to a Health Savings Account (HSA).

An HSA allows eligible individuals to set aside money for qualified medical expenses. Contributions may receive favourable tax treatment when the account meets applicable requirements. The IRS provides guidance on Health Savings Accounts and other tax-favoured health plans.

When reviewing your HSA, check whether a beneficiary has been designated and whether that designation remains consistent with your estate planning goals.

Life and Disability Insurance

Employer-provided life and disability insurance can provide financial protection if you die while employed or become disabled. Life insurance can provide your beneficiary with a stated amount of money after your death, subject to the terms of the policy.

Employer-provided coverage may expire, change, or become portable when you leave your employer, depending on the terms of the plan or policy. Review the plan documents carefully so you understand what happens to your coverage if your employment ends.

Because life insurance can form an important part of an estate plan, review both the amount of coverage and the person or trust named as beneficiary.

Our article on life insurance and estate planning explains additional considerations for protecting beneficiaries.

Why Beneficiary Designations Matter During Open Enrollment

One of the most important steps during open enrollment is reviewing your benefit package and deciding whether your current elections still meet your needs.

At the same time, review the beneficiary designations attached to your retirement accounts, life insurance policies, HSAs, and other applicable benefits.

A primary beneficiary is the person or entity who is first in line to receive the applicable benefit after your death, subject to the terms of the plan or policy. A contingent beneficiary, sometimes called a secondary beneficiary, may receive the benefit if the primary beneficiary cannot receive it.

Beneficiary designations can be particularly important because certain retirement accounts and insurance policies may pass directly to the designated beneficiary rather than according to the instructions in your will.

This means that updating your will does not necessarily update your beneficiary designations. In some circumstances, a beneficiary designation can also conflict with an estate plan. Learn more about when beneficiary forms can override or conflict with an estate plan.

Review Your Beneficiary Designations

Even if you have previously enrolled in your employer’s benefits, review your beneficiary designations each year to make sure they still reflect your wishes.

Benefits that may require a beneficiary designation include:

• Life insurance policies
• Retirement accounts
• Health Savings Accounts (HSAs)
• Certain disability or other employee benefit policies, depending on the plan

Do not assume that a beneficiary designation is automatically updated because you changed your will or other estate planning documents. You may need to update the designation separately through your employer, plan administrator, insurance company, or financial institution.

What Happens If Your Employer Changes Benefit Providers?

Your employer may change the insurance company or provider responsible for an employee benefit plan. When this happens, do not assume that your previous beneficiary designations or coverage have automatically carried over.

Review the documents provided by the new plan administrator or insurance provider. Confirm that your coverage remains correct and that the beneficiaries listed on the new account or policy reflect your wishes.

If you are unsure whether your beneficiary designation transferred correctly, contact the plan administrator or provider for confirmation.

Open Enrollment Beneficiary Checklist

As part of your open enrollment review, consider taking the following steps:

1. Review your current benefits. Confirm which retirement, health, insurance, and other benefits you currently have.
2. Review your retirement contributions. Check your contribution rate, available tax treatment, and any employer matching contributions.
3. Review your insurance coverage. Consider whether your life and disability coverage remains appropriate for your circumstances.
4. Check your beneficiary designations. Review the primary and contingent beneficiaries listed on applicable accounts and policies.
5. Check for provider changes. If your employer has changed an insurance company or plan provider, confirm that your beneficiary information and coverage have carried over correctly.
6. Compare your elections with your estate plan. Make sure your employee benefits and beneficiary designations continue to support your overall estate planning goals.
7. Keep written confirmation. After updating your beneficiaries, obtain written confirmation from your employer, plan administrator, or provider when available.
8. Share important updates with your estate planning attorney. Keeping your attorney informed can help ensure that your beneficiary designations and estate plan work together as intended.

Estate Planning Concerns

Beneficiary designations should be reviewed whenever your circumstances or intentions change. Marriage, divorce, the birth or adoption of a child, the death of a beneficiary, changes to your assets, or changes to an employer-sponsored plan can all be reasons to revisit your beneficiary choices.

If you are considering changing a beneficiary, review the change in the context of your overall estate plan. This can help identify potential conflicts between your beneficiary designations, will, trust, and other estate planning documents.

Once you have updated your beneficiaries, obtain written confirmation from your employer’s human resources department or the applicable plan provider. You should also keep a copy of the confirmation with your estate planning records and provide relevant information to your estate planning attorney.

How Littleton Legal Can Help

Employee benefits can represent a significant part of your financial picture. Beneficiary designations are an important part of making sure those assets are transferred according to your wishes.

Our estate planning team can help you review how retirement accounts, life insurance, HSAs, and other beneficiary-designated assets fit into your broader estate plan.

If you have questions about beneficiary designations or want to review your estate plan, contact Littleton Legal to discuss your circumstances and planning goals.

Frequently Asked Questions

What should I review during employee benefits open enrollment?

Review your retirement contributions, employer matching contributions, health care and insurance coverage, HSA options, and beneficiary designations. You should also consider whether your elections remain appropriate for your current financial and family circumstances.

Why should I review my beneficiary designations during open enrollment?

Open enrollment provides a regular opportunity to check whether the people or entities listed as beneficiaries still reflect your wishes. Beneficiary designations on retirement accounts and insurance policies may operate separately from your will or trust, so keeping them current is important.

What is a primary beneficiary?

A primary beneficiary is the person or entity designated to receive the applicable benefit when you die, subject to the terms of the plan or policy.

What is a contingent beneficiary?

A contingent beneficiary, sometimes called a secondary beneficiary, is generally the person or entity designated to receive the applicable benefit if the primary beneficiary cannot receive it, subject to the terms of the applicable plan or policy.

Do I need to update my beneficiary designation if I change my will?

Not necessarily. Changing your will does not automatically update beneficiary designations on retirement accounts or insurance policies. These designations should be reviewed separately and coordinated with your overall estate plan.

What if my employer changes its benefits provider?

If your employer changes an insurance company or plan provider, review your coverage and beneficiary information with the new provider. Do not assume that your previous elections or beneficiary designations have automatically carried over.

How often should I review my beneficiary designations?

You should review your beneficiary designations periodically and whenever there is a significant change in your family, finances, estate plan, or employer-sponsored benefits. Open enrollment can provide a useful annual reminder to review these choices.