Why Most Employees Miss Their Full Benefits | Dan Pascone with Kathy Mychajluk | Episode #27

Kathy says she has 25 years of corporate HR and benefits experience across healthcare, IT, and finance, plus 4 years in the public sector. She started in pensions, moved into executive benefits, and eventually worked on medical, dental, and every other employee benefit, including plan contract negotiations with vendors and benefit consultants. Today she advises HR teams at Connecticut employers on benefits timeframes and required documents.

She also says that losing several jobs to acquisitions, relocations, and mergers led her to write a book, The VIP Job Search, which she says came out that February and is sold on Amazon, Barnes & Noble, and Books-A-Million. Kathy is a guest, her views are her own, and she speaks here in a personal capacity, not on behalf of the State of Connecticut. [VERIFY: confirm her role description and book publication date.]

Kathy says new hires usually get about a month to enroll, set the materials aside, and then receive 3 reminder emails from HR, the last saying they have 3 days left. If they miss the deadline, she says, they can default into basic medical coverage with no dental or vision, and may miss 401(k) enrollment too. Defaults vary by employer, so check your own plan.

Her process:

• Step 1, look backward: Review what you used in the last year or the current year. Did you see the doctor often, pay a lot in co-pays, use out-of-network providers, or need major dental work? She suggests calling your doctor's office to confirm they still take the coverage you're considering.

• Step 2, choose based on usage: Make your elections based on that real utilization. At larger employers there may be 2 or 3 medical options and 2 dental options, where paying a little more can buy better coverage.

She also recommends skimming the enrollment guide, setting it aside to absorb it, and asking basic questions such as how many medical and dental plans are offered and whether there is vision, disability, and life insurance. If you're changing roles, see our video How to Manage Your Money During a Job Change. Dan notes that the period around a new role is one of the most influential times for financial planning.

Kathy's view is that if you don't understand your benefits, you're likely to pay more out of pocket. She says she has seen people receive bills of $40,000 to $50,000 from non-participating hospitals, so she urges people to know their plan and confirm their doctors and facilities are in network. That's an anecdote from her experience, not a statistic.

She also points to the tax angle. She says medical, dental, vision, and flexible spending account (FSA) contributions are pre-tax, while life insurance and short-term disability generally are not. Tax treatment varies by plan and how premiums are paid, so confirm with your HR team. Her bottom line is that if you plan your basic benefits well, you may free up money to direct into your 401(k).

Dan described the health savings account (HSA) as having a potential triple tax advantage: money goes in tax-free, grows tax-free, and comes out tax-free when used for qualified medical expenses. HSAs are typically paired with a high-deductible health plan. He asked whether it can make sense to take on the higher deductible to get the HSA.

Kathy says that question comes up often, especially from employees with 10, 15, or 20 or more years at a company. In her experience, switching is a mindset change that comes down to fear, even when it makes sense on paper. She says younger employees who enroll tend to love it, and overall the split is about half and half.

Our caution: whether a higher deductible makes sense depends on your health costs, your ability to cover the deductible in cash, and how you plan to use the account. Some states also treat HSAs differently for state taxes. For a deeper look, see How to Use Your HSA as a Tax-Free Retirement Account (2027).

Kathy's central point is that it's not only about how much you make, it's about how much you keep. She recalls early in her pension career meeting people earning less than $80,000 a year who retired around age 55 with paid-off property, and others earning $800,000 or more a year who came in nearly in tears, filing for bankruptcy. Dan agreed that high income doesn't guarantee a good financial path, and says we see very high earners who are off the mark on long-term goals.

Her practical advice:

• Don't discount small beginnings: Some plans have a 1% minimum, and she recalls employers where you could contribute as little as $10 a paycheck.
• Use the raise rule: When you get a 2%, 3%, or 4% raise, put half into your 401(k) and spend the rest.
• Say no to yourself sometimes: She says she directs her car payment amount into her 457 account, and describes a peer who bought a new car and then faced a $1,200 monthly cost with insurance and taxes while working remotely. She notes the peer pressure in Fairfield County.

Dan says he often asks high earners whether they contribute to a Roth, and many answer that they make too much. His point: you may earn too much to contribute directly to a Roth IRA, but you may not be limited from a Roth 401(k) or an after-tax option inside a 401(k), if your plan offers it. If yours does, our guide to the mega backdoor Roth explains how that option works.

Kathy says she has noticed more people paying attention to Roth over the last 6 to 7 years, after careers of hearing “pre-tax, pre-tax.” She describes people who reach retirement with $1 million in a 401(k) and then realize it's all taxable, and one employee who didn't want to take a required minimum distribution (RMD) because he didn't want the tax. She notes RMDs are a federal rule, not an employer decision.

Dan's framing is that it's not either/or. A traditional balance is taxable when withdrawn and counts toward RMDs. Qualified Roth withdrawals are tax-free, and under current rules Roth balances in employer plans are not subject to lifetime RMDs. Having both gives you flexibility to draw from either bucket in a given year. He also says the old assumption of a lower tax bracket in retirement may not hold, and in his view tax rates could be higher in the future, though no one knows. We can't predict tax law, which is why we focus on flexibility.

Kathy is a coffee drinker whose single-meal pick is pizza, specifically Pepe's in New Haven. Her must-have tool is her journal, where she writes down what she needs to accomplish the next day. Her favorite phrase is to start small and have a plan, adding that if you don't plan, you plan to fail. Her favorite finance author is Dave Ramsey, whom she calls practical. She also says that if you don't ask, you don't know, and encourages people not to be embarrassed to ask HR questions. Her advice to her younger self: save more money. She says you can reach her on LinkedIn.

Kathy and Dan cover a lot of ground. Here's what we think gets overlooked:

• Enrollment elections are financial decisions: The medical plan you choose, whether you use an FSA or HSA, and your 401(k) rate all affect cash flow and taxes, yet many people treat them as an HR chore.
• The cheapest premium isn't always the cheapest plan: Kathy's advice to choose based on last year's usage can reveal when a higher premium costs less overall, or when a higher deductible with an HSA fits.
• Savings habits can matter as much as income: Kathy's stories, and what we see with clients, suggest that automatic increases and avoiding lifestyle creep matter a great deal.
• Pre-tax feels good now, taxes still arrive: A large pre-tax balance is a future tax bill that you don't control the timing of, which is why we like having both traditional and Roth buckets.
• Plan details vary: Employer match formulas, vesting, Roth availability, and after-tax options differ by plan, so read your plan documents or ask HR.

These are hypotheticals for illustration only, not projections or recommendations.

The raise rule: Say an executive earns $300,000 and gets a 3% raise, or $9,000 a year. Following Kathy's approach, half ($4,500) goes to the 401(k) and the rest is spendable. At an assumed 35% federal marginal rate, the pre-tax contribution lowers current federal tax by about $1,575, so the reduction in take-home pay is about $2,925 (ignoring state and payroll taxes). Repeated at each raise, the savings rate rises without a single large cut to lifestyle.

A mixed withdrawal: Say a retiree needs $100,000 from retirement accounts in a given year. If everything sits in traditional accounts, that's $100,000 of taxable income from those accounts. If instead the retiree draws $50,000 from a traditional account and $50,000 in qualified Roth withdrawals, only $50,000 is taxable income from those accounts. This ignores other income, deductions, and Roth qualification rules, which you should confirm with your CPA.

For the executives we work with, benefits are one piece of total compensation alongside salary, bonus, and equity. We cover equity in our Equity Compensation Playbook (our framework for RSUs, options, and ESPPs), and we look at benefits in the same context: what is the dollar impact, what are the tax effects, and what does it free up for the plan.

Inside Life Driven Investing (building a portfolio backward from the life you want), we sort dollars into our Four Liquidity Bands: 0–2 / 3–5 / 6–10 / 10+ years. An FSA balance, which generally must be used within the plan year, belongs near the front of that range, while retirement contributions sit at the long end. How an HSA is used determines where it belongs. [VERIFY] We revisit these elections annually and as part of our Quarterly Strategy Rhythm (a recurring review of cash flow, taxes, and equity). For a plan-by-plan view, see Company Retirement Plans: The Ultimate Guide.

This conversation is most relevant to executives and senior professionals in their 40s–50s with $500K+ in household income, complex compensation, and an employer benefits package they may not have looked at closely. It's especially useful if you're starting a new role, approaching open enrollment, or have only contributed to pre-tax accounts.

If you're an executive or senior professional trying to make sense of your benefits, 401(k) options, and equity compensation, we're happy to look at the whole picture with you. Book a free Wealth Strategy Call to walk through your hybrid retirement, equity, and tax situation. It's a conversation, not a sales pitch.