What’s Missing from School District Benefit Guides

I gave a financial presentation to a group of teachers in a school district earlier this year. During the presentation the topic of the ways employers, in this case school districts, share information about the benefits they offer came up. Many school districts in Colorado (and elsewhere) put together a “Benefits Guide” which is typically a PDF that is available on the district’s website (or sometimes intranet) that summarizes all of the benefit offerings. There are also some school districts, usually smaller ones, that do not, and often their benefit information is either difficult to find on their website or it just isn’t posted. I’ve discovered through the Financial Literacy for Colorado Educators class that I teach that many Colorado educators can’t easily find even information about all of their benefits, and the only time they are really provided information about them is directly at the time of open enrollment (often simply as a list of choices). The district I was presenting to was one of those districts that didn’t have the information readily available, so I suggested they look at what other districts published and create something similar for their district.

A couple of days later Littleton Public Schools, which is the district I spent most of my career in, posted their benefits guide for the 2025-26 school year, as open enrollment had just begun. I sent that along to my contact at the school district I had presented to along with a message that said this was an example of what I had been talking about but that I would go “a bit further.” He replied and thanked me and asked what I thought was “missing” from this, and that’s the reason for this blog post :-).

I want to be clear. I think LPS’s benefits guide is really well done. It’s informative, well organized, easy to read, and tries to not only list the benefits offered but also provide some basic education to help employees understand those benefits. The improvement I’d like to see is around the “basic education” part. While the guide does a great job explaining the different benefits, and even gives some criteria to help distinguish between some of the benefit choices, I think it stops short of truly providing guidance to their employees to help them make the best decisions.

I think there are likely two reasons why school districts (as employers) don’t do this. First, I think it’s often simply ignorance. And I’m not using “ignorance” in the pejorative sense, but the literal meaning of “they don’t know.” The people in the Human Resources Departments putting the guides together are often (but not always) well informed about what they offer, and even some of the basic differences between the offerings, but don’t have the knowledge to go to the next level to really dig into how to determine the best choice for each employee. (I think this is particularly true in smaller districts where they might not have the institutional knowledge built up over time and it totally depends on the background and knowledge of the current person putting together the information.)

The second reason, and the one that is likely tougher to overcome, is fear of liability. The folks in Human Resources have probably been told by district lawyers (or just intuit), that if they try to give too much information to employees that might be seen as recommending one option over another, and that could result in some kind of legal liability for the district if someone claimed they had been given poor information. I think that this is likely somewhat of a legitimate concern, but also once that isn’t that difficult to overcome. Districts could include a strong disclaimer in their benefits guide along the lines of “this is not financial advice….you need to make your own decisions….etc.” They could even make employees sign an electronic waiver before they could even download the document if they wanted to. And then the language for each portion of the document that was perhaps concerning to them could be worded carefully to reinforce that disclaimer. After all, the core competency of school districts is educating people, shouldn’t they be comfortable education their own employees about their benefit choices?

I’ve written about this before, suggesting school districts offer new employees financial orientation in addition to the normal orientation they receive. I still think they should do that, because a formal orientation process would be more impactful than a static benefits guide document. But I also thought that maybe I could “annotate” LPS’s (already good) Benefits Guide to perhaps illustrate what I’m talking about. While in practice this would likely mean rewriting the guide to better incorporate these ideas, for the purposes of this post I’m just going to indicate the type of information I would add and the section of the document where I would add it. Instead of making the basic guide much longer, I would likely include a link in the guide to the annotations (which would also allow the opportunity for employees to sign a waiver before opening it if a district wanted to do that). Ideally all of this supplemental material would be collated into a single education guide to provide any-time learning for employees (as well as being specifically directed to it during open enrollment). I also think the district should hold a webinar each year going over these annotations, with an opportunity for Q & A at the end.

So here is the somewhat clunky “annotated” benefits guide. I simply inserted markers on the pages in the sections where I would annotate. Those markers correspond to the annotations below.

Page 5: Medical Plan, Annotation #1

Disclaimer: The following is provided for informational and educational purposes, it is not financial advice. LPS is not advising you on what to choose, simply providing you information that may help you make better benefits decisions. Personal finance is personal, and you should always make decisions appropriate to your unique situation and personal preferences.

It’s important to understand the purpose of insurance. Many folks in previous generations grew up with the idea that insurance was supposed to “pay for things”. Particularly when it came to medical insurance, the feeling was that insurance should pay for everything – or almost everything – and we (individuals) should pay very little. Under our current system this just isn’t possible.

Insurance companies have to make enough money to cover expenses (which includes any claims you make plus the overhead of administering the program) and, if they are for-profit, have to make a profit above and beyond that. The only way to do that is to make sure the combination of the premiums you pay plus any out-of-pocket expenses you pay adds up to at least what their expenses are plus whatever profit they make. Every individual’s situation is unique, of course, but generally you want to purchase the least expensive insurance that protects you from catastrophic expenses. That’s the original idea behind insurance, that a group of people pool their money so that when something unfortunate happens to one person, their life isn’t ruined. For that to happen, however, there have to be other people who end up paying more for insurance than for the benefit they actually receive. Instead of looking at insurance as “paying for things,” try to reframe your thinking to insurance as “protecting against catastrophe.”

LPS offers a choice of four medical plans, two from Kaiser and two from Cigna… [Note: To shorten this a bit, I’m just going to focus on the Kaiser offerings, but in the actual guide I would write up both.] The differences between the two Kaiser plans include the premiums, copays and coinsurance, the amount of the deductible, and the out of pocket maximums.

Kaiser’s DHMO offers a deductible of $1,750 for individuals or $3,500 for families, and you also have copays for certain types of medical services even before you reach your deductible. For example, instead of paying the full price for a visit to your primary care physician, you will pay a $25 copay (preventive care is always no cost). Or, for outpatient surgery, you will have a $500 copay instead of the cost being subject to the deductible. Prescriptions have separate copays that vary on the type of prescription, but are typically $20, $40, or $60. For other services, you may have to pay out of pocket until you meet your deductible, then you typically have to pay 20% coinsurance after that (meaning you pay 20% of the actual cost). If you have a particularly costly health care year you have an out-of-pocket maximum of $4,500 for individual coverage, or $9,000 for family coverage. Once you reach that maximum for the year, you don’t pay for any other covered healthcare costs for the rest of the year. You are allowed to contribute pre-tax dollars to a Medical FSA to help pay for out-of-pocket expenses if you choose to.

Kaiser’s High-Deductible Health Plan (HDHP) has a deductible of $2,500 for an individual or $5,000 for a family. Unlike the DHMO, there are no copays, you are responsible for the full cost of the services you receive until you reach the deductible. After that, you typically pay the 20% coinsurance (although some services, like outpatient surgery, the coinsurance is only 10% once you reach your deductible). Again, preventive care is no cost, and prescriptions are also subject to the deductible but many prescriptions are low cost. If you have a particularly costly health care year you have an out-of-pocket maximum of $4,000 for individual coverage, or $8,000 for family coverage. Once you reach that maximum for the year, you don’t pay for any other covered healthcare costs for the rest of the year. You are allowed to contribute pre-tax dollars to an HSA to help pay for out-of-pocket expenses if you choose to (and LPS contributes to your HSA), as well as pre-tax dollars to a Limited Purpose FSA for out-of-pocket dental and vision expenses.

So how should you decide between these two plans? As always, it depends on your unique situation and personal preferences, but one way to think about this is to explore what your total costs would be (including premiums) under different health cost scenarios. Many people end up choosing the DHMO out of fear, not realizing that the extra premiums they are paying for those lower deductibles would have covered much (or all) of the difference of the higher deductible of the HDHP. In general, the tradeoff between the DHMO and the HDHP is that the DHMO will have higher premiums but lower (initial) out-of-pocket costs, whereas the HDHP will have lower premiums but higher (initial) out-of-pocket costs. It’s important to factor in the savings you get from the lower premiums for the HDHP when comparing your projected total costs. You’ll have to do a little bit of math for your specific coverage levels and your anticipated healthcare needs.

Here is a spreadsheet that can help you compare total costs for you under either the DHMO or the HDHP. To be perfectly clear, this spreadsheet is just a ballpark comparison, you would need to factor in your own anticipated health care needs and adjust accordingly.

Column A lists the type of coverage you have (employee only, employee plus spouse, employee and children, or family coverage). Find your level of coverage.
Column B lists some cost of care scenarios for the plan year, starting with $0 and increasing to as much as $15,000. This represents the actual cost of the care you receive, not necessarily what you actually pay.
Columns C and D then show estimates of what your total cost would be under these different scenarios. These estimates include the premiums (which are exact) and the out-of-pocket costs you would have to pay (which are estimates as they would vary based on the exact care you received).

For example, Row 6 shows that if you have employee-only coverage and had care that cost $9,000 during the year, your total cost (including premiums) under the DHMO is an estimated $3,762 and your total cost (including premiums and the district contribution to your HSA) under the HDHP is an estimated $3,148.
Columns E through G then show the increase to your take home pay from any savings from choosing the HDHP under each scenario (if you put your gross annual salary in cell G1).

For example, in Row 6 the anticipated yearly savings is $614 which would result in a 1.29% increase to your take home pay (if your gross salary was $70,000).

As you can see from the default numbers in the spreadsheet, you actually end up paying less with the HDHP than with the DHMO under all scenarios. Again, you should do a little math with your expected health care costs and adjust the spreadsheet accordingly, but this gives you a decent generic way to think about it. During “good” health care years, employees will save a lot under the HDHP. During “bad” health care years, employees will still save but not as much. This is because you pay premiums no matter what (and that money is always “gone”), but you only pay for actual health care costs based on the care you need. The takeaway is that most LPS employees under most scenarios should likely choose the HDHP.

There is a second tab (Investment) that shows the impact of taking those yearly savings and investing the money over time. As an example, Row 45 shows that after 35 years with employee-only coverage your portfolio value from investing the average savings each year would be over $102,000. (Note that this doesn’t include the inevitable price increases for premiums and health care costs, so the actual amount would be even more.)

Page 7: HSA, Annotation #2

If you choose the HDHP, LPS will contribute money to your Health Savings Account for you ($1,250 a year for employee only coverage, $1,700 a year if you have any other coverage). You also can contribute to your HSA, with the maximum (including LPS’s contribution) for 2025 being $4,300 for employee only coverage and $8,550 for any other coverage (if you are over age 55 you can add $1,000 to each of those numbers). When you subtract off LPS’s contribution, that means you can contribute as much as $254.16 per month for employee-only coverage, or $570.83 per month for any other coverage. Because you can rollover any unused funds each year, you should try to contribute as much as possible to your HSA each year (up to the maximum).

A reminder that this is all pre-tax money, so you will never pay taxes on this money (federal, state, and medicare taxes). Colorado has a flat tax rate of 4.25%, and medicare is a flat rate of 1.45%. How much you will save on your taxes depends on your marginal tax bracket at the federal level, but for many employees that will be 22%. If that’s the case for you, then you will save a total of 27.7% of your contributions. If you have employee-only coverage and max out your contributions, that’s a savings of $844 for the year. If you have any other coverage and max out your contributions, that’s a savings of $1,897 for the year.

You can use the money in your HSA to reimburse yourself for any medical, dental or vision expenses that you or your family members have. If you can afford to pay those expenses out of pocket, a better strategy is to not reimburse yourself immediately but instead to keep the money in the HSA, invest it, and reimburse yourself later. HSAs allow you to reimburse yourself at any time for any covered expenses incurred while covered by an HDHP. If you can afford to not reimburse yourself immediately and invest the money in your HSA instead, then the money in your HSA will grow exponentially due to compound interest and you will end up with much more to reimburse yourself for both expenses you have incurred in the past as well as future health care expenses (including in retirement). This spreadsheet demonstrates what your HSA could grow to if you follow this strategy.

For example, Row 39 shows that after 35 years you would have over $594,000 in your HSA under employee only coverage, and over $1.1 million in your HSA with any other coverage (and completely tax free if used for any covered expenses past, present or future). Note that this underestimates the total as the maximum will increase each year going forward. If you choose to invest your HSA, you would also want to consider periodically transferring your HSA money from your LPS account to a Fidelity HSA.

Some people worry about what happens if they don’t have enough covered expenses (health, dental and vision) to reimburse themselves. Given the cost of health care over your lifetime that is unlikely, but if you and your family are very lucky and don’t have many expenses, then after age 65 you can withdraw any remaining money from your HSA for any reason and simply pay taxes on it (which means if functions just like a traditional IRA, with tax-deferred growth that entire time). So the “worst case” scenario is still an excellent outcome.

Page 8: FSA, Annotation #3

No matter which health plan you choose you can contribute to a Dependent Care FSA. While this can pay for any dependent care, it is typically used for daycare expenses. Most parents with children in daycare spend way more than the $5,000 Dependent Care FSA limit each year, so this is something you would likely want to max out for any year you have kids in daycare. This money not only comes out pre-tax (federal, state and medicare) but if your PERA membership is prior to July 1, 2019, it also come out pre-PERA (meaning an additional 11% savings). So if you are in the 22% federal tax bracket, that’s a total of 38.7% savings or $1,935 per year. (If your PERA membership is after that, it’s still a 27.7% savings or $1,385 per year).

If you choose the DHMO, then you can’t contribute to an HSA but you can contribute to a Medical FSA. Unlike an HSA, you are only allowed to rollover 20% of the maximum from year to year (so $660 in 2025), so you want to estimate this carefully and you may not want to max this out each year. Don’t let this stop you from using the FSA, however, because the combination of the tax savings and the 20% rollover provision allows you to contribute over $900 with no “risk” of losing anything (if you have a rollover from a previous year you would need to subtract that amount from the $900). Again, for those with PERA membership prior to July 1, 2019, you would save 38.7% or $348 a year from a $900 contribution (and even more if you anticipate having a significant amount of medical, dental and vision expenses during the year and contribute more than $900).

This spreadsheet demonstrates the tax savings and the increase to your take home pay if you max out your contributions. If you can’t max out the contributions, change the numbers to what you will contribute to see the savings. The second tab then shows what your portfolio value would be if you invested those savings (it defaults to having a child in daycare for 8 years, but you would want to adjust for your circumstances). As an example, Row 42 shows that after 35 years (with the given assumptions), you would have almost $300,000 in your portfolio if you invested your savings and your PERA membership was prior to July 1, 2019.

If you choose the HDHP with HSA, you can also choose to contribute to a Limited Purpose FSA in addition to the HSA. The Limited Purpose FSA can only be used for dental and vision expenses and must be spent by the end of the plan year (no rollover). So you would want to estimate this carefully, but this can amount to significant tax savings if you know you (or your family members) will have dental and vision expenses during the plan year. This translates into an effective 38.7% discount on your dental and vision expenses for the year (27.7% if your PERA membership is on or after July 1, 2019), while allowing you to max out and invest your HSA.

Page 13: PERA, Annotation #4

Your PERA pension is an huge part of your total compensation, so understanding how it works is incredibly important.

You need to understand your HAS table and how it works.
You need to understand whether you are eligible to purchase service credit and the pros and cons of doing so.
You need to understand the impact of advancing as far as you can on the salary schedule before your HAS years.
You need to understand the impact of having a defined benefit pension on your asset allocation for your investments.

Page 13: Supplemental Retirement Plans, Annotation #5

You have a choice of investing directly from your paycheck in PERA’s 401k and/or 457b plans or TIAA’s 403b and/or 457b plans. Understanding the pros and cons of each plan is important.

You need to understand the similarities and differences of 401ks, 403bs, and 457bs, and that the 401k/403b is one combined “bucket” in terms of contributions, and the 457b is a second, separate bucket with its own contribution limits.
You need to understand asset location, allocation, and tax status, as well as the impact having a defined benefit pension could have on your asset allocation.
You need to understand the impact of fees on your investment returns.

This spreadsheet illustrates the different in fees between PERA’s 401k/457b and TIAA’s 403b/457b (as well as an IRA at Vanguard as comparison). As you can see, PERA’s offerings are lower cost and will result in a greater return than TIAA’s. (TIAA does offer some basic “advice” as part of their service.)

While the 401k, 403b and 457b plans are fairly similar, the pre-tax 457b plan does have one big advantage which is the ability to access your money before age 59.5 without the 10% early withdrawal penalty. Once you leave LPS (and PERA employment in the case of PERA’s 457b plan), you can access the money in your 457b at any time without penalty (although you will still owe taxes). For anyone who anticipates retiring before age 59.5, the 457b is an excellent option for any pre-tax contributions.

In general, this is the “order of operations” most employees would want to follow when funding these accounts:

If you choose the HDHP with HSA, you would want to try to max out the HSA and invest it.
Most employees can contribute to an IRA (either pre-tax or Roth) on their own (not through LPS).
Contribute to your 401k, 403b, and/or 457b (either pre-tax or Roth).
- Contribute any pre-tax contributions from your paycheck to a 457b plan. If you max out the pre-tax contributions to the 457b and want to contribute more pre-tax, then you can contribute to the pre-tax 401k or 403b. (Note that the yearly maximum in each type of account is combined pre-tax and Roth contributions).
- Contribute any Roth contributions from your paycheck to a 401k or 403b plan. If you max out the Roth contributions to the 401k/403b and want to contribute more Roth, then you can contribute to the Roth 457b. (Note that the yearly maximum in each type of account is combined pre-tax and Roth contributions).

Page 14: Student Loans, Annotation #6

This is obviously in flux right now with the new Administration in Washington. Once it all gets settled and we know what this looks like going forward, then information similar to what I’ve written about before in blog posts such as this one and this one.

I want to be clear that this is not what the final version would look like. This was just an example to demonstrate the concept. The final version would be a bit more polished and likely organized in one supplemental document, and it would need to be updated slightly each year with the changing numbers. I would also highly recommend that each school district provide some staff development around this and/or around the broader topic of financial literacy. A forward-looking district might even buy all of their employees the book specific to their pension plan (here’s Colorado’s), or a more in-depth (but not pension-specific) book. This would pay huge dividends (pun intended) in employee satisfaction and longevity, which in turn would result in even better outcomes for our students.