Open enrollment season is a confusing and stressful process for many workers, and high inflation is making this year’s benefit-selection period particularly fraught.

From health insurance to flexible-spending accounts, making the right choices can save you significant amounts of money, but it pays to do some research first.

Here’s a rundown of common employee benefits and what financial planners recommend keeping in mind as you evaluate them.

Health Insurance Plans

The basics: Many workers have to take whatever plan an employer offers, while others may need to choose between a preferred provider organization (PPO) or a high-deductible health plan (HDHP). You’ll generally pay higher premiums with a PPO but have a much lower deductible (the amount you have to pay out of pocket before coverage kicks in) than with high-deductible health plans.

In 2023, the IRS defines a HDHP as a plan with a deductible of at least $1,500 for a single person or $3,000 for a family.

The wrinkle:  “A massive number choose the most expensive plan, assuming it’s best,” said Andrew Frend, head of strategy and analytics for Voya Financial’s employee benefits business. “People are still leery of high-deductible plans, even if they make the most sense, and overspending on health can come at a cost to emergency savings and retirement plans.”

To show how a pricier plan may not be worth it, financial planner Peter Palion, of Master Plan Advisory in East Norwich, New York, shared the example of a client in the metro New York area. The client was offered two plans, with a difference of about $1,000 in the deductible. A Cigna PPO was at the core of both, but the costlier plan reimbursed 50% of out-of-network costs, and the lower-cost plan didn’t reimburse any.

In locations where PPO networks aren’t extensive and your doctor isn’t in-network, the plan with out-of-network coverage might make sense, Palion said. In the New York metro area, most doctors accept Cigna, and there are many doctors to choose from, so for his client the pricier plan wasn’t worth it.

Flexible Spending Accounts (FSAs)

The basics: There are three types of these tax-advantaged accounts — for commuting, dependent care and health care.

Healthcare FSAs let you have as much as $3,050 deducted from your paycheck, before taxes, throughout the year. You can tap that money to reimburse yourself for costs such as copays, deductibles, dental expenses that aren’t covered by your plan, and even sunscreen.

Dependent-care FSAs can be used for day care, preschool, after-school programs, or for some elder-care expenses. The most a single person or married couple can contribute is $5,000. The limit for a commuter FSA is $300 a month; employees can start or stop benefits at any time, but unused funds can’t be refunded.

Being able to use pretax money means healthcare dollars go farther and it lessens taxable income. If you live in a high-tax state and make $100,000, you can easily have a combined income tax rate of 35%, so tax savings are big.

The wrinkle: While day-care costs are knowable, figuring out how much to save in a healthcare FSA is tricky. With both accounts, you’re stuck with the dollar amount you choose unless you have a major life event like getting married or having a child, and if you don’t use all the money, you lose it.

If a big dental expense is coming up, putting the maximum amount in a healthcare FSA makes sense. But money in health-care and dependent-care FSAs generally has to be used within the year. The average FSA forfeiture amount in 2019 was $369, according to an Employee Benefit Research Institute database.

Health Savings Accounts (HSAs)

The basics: If you’re in a high-deductible health-care plan, you’re likely eligible for a health savings account. HSAs let individuals contribute as much as $3,850 in pretax funds, or $7,750 for family coverage; employees over 55 can contribute an additional $1,000 a year. The money can be deducted from paychecks or contributed post-tax (and deducted on tax returns), and used for an array of medical expenses.

HSAs can be invested in mutual funds and grow tax-free, and money used for medical costs remains untaxed. HSAs are portable — you don’t lose them if you leave your job, and unused money rolls over and is available for future years. (Users of HSAs can’t have health-care FSAs, but can open limited-purpose FSAs for vision and dental expenses.)

For well-paid clients in high-tax states, “my advice skews to getting every bit of tax juice that you can from benefits, which generally means maxing out your HSA,” said wealth adviser Rachel Elson, who works in the San Francisco office of Perigon Wealth Management. “We also encourage people to cover health-care expenses with cash flow to the extent they can, and let HSAs be invested and grow.”

The wrinkle: You need good cash flow to pay medical expenses out of pocket. If you use HSAs for anything but qualified medical expenses before age 65, you pay a 20% penalty and income tax. Once you’re eligible for Medicare, the 20% penalty goes away, though you’ll pay income tax on amounts used for non-medical expenses.

This article was provided by Bloomberg News.