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					PERSONAL FINANCE                                                                                                                 1. 800. 973.1177

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Shop on the Clock
[The Motley Fool by Dayana Yochim]
This isn’t another story about how to get last-minute holiday bargains. (Though if you insist, here are a few Fool-approved ideas.)

No, this is a story about how to milk your           (where the employee pays out of pocket and is         Group disability insurance isn’t as stan-
employer for every last penny that is rightfully     reimbursed).                                          dard a perk. If your employer does not pay
yours.                                                                                                     for coverage but offers discounted rates to
                                                     If your boss is particularly generous, there          employees, strongly consider it. If you suffer
Remember that thick packet of company ben-           are additional perks you shouldn’t pass up. An        from a non-work-related injury, this coverage
efits materials the smiling human resources          FSA (flexible spending account) lets you put          could net you up to 60% of your salary while
assistant handed you on your first day on the        away pre-tax dollars to cover expenses that           you are unable to work. Short-term disability
job? Neither do we. So go ahead and dig it out       aren’t included in your health-care coverage.         insurance kicks in when you must miss work
from the bottom drawer because there may be          Co-payments, extra contact lenses, chiroprac-         for anywhere from eight days to six months.
dollar bills stuck to nearly every page.             tor visits — even dependent care costs can be         Long-term coverage applies to periods of six
                                                     paid for out of this account. (Our tax man, Roy       months or longer.
That stack of brochures and booklets contains        Lewis, describes the rules in more detail.)
oft-overlooked benefits that can add up to                                                                 As with warehouse clubs and white socks,
substantial savings over time. Why pay for           There’s a certain amount of record-keeping            huge savings can be had when buying in bulk.
things like doctors’ bills, disability insurance,    required. You determine the amount of money           If you do not have life or disability coverage,
and baby-sitting if your boss is willing to pick     you want deducted from your paycheck for the          ask your human resources department for
up the tab?                                          FSA. Any dollars that aren’t used by the end of       information on getting a company discount.
                                                     the plan year are forfeited. Employees must           Then spend a little time comparison shopping.
Here’s a list of common company benefits to          submit receipts for reimbursement.
guide your at-work shopping spree.                                                                         Retirement extra credit
                                                     Take a look at your credit card statements            Deferred compensation plans are a kind of
Discounted doctors’ bills                            to get an idea of how much you might save.            “pay now, get paid back later” arrangement.
For 2005, the average family of four covered         You might be surprised at how much you pay            They allow you to defer some of your current
by an employer-sponsored health-care plan is         piecemeal over the year on expenses that are          compensation until either retirement or some
expected to spend about $2,000 on health-           covered under FSAs. The savings — an aver-            other time frame. Employees sacrifice some
care costs, more than $2,000 of which will be        age of 28% on expenses, because of the pre-           investing flexibility with such plans because
spent on out-of-pocket expenses.                     tax contributions — are well worth it. On that        many employers invest the funds in cash-
                                                     $2,000 that the average family will shell out         value life insurance policies.
Health care is probably the biggest money-           out-of-pocket, that’s a savings of nearly $560.
saving benefit to working for The Man. While                                                               Taxwise, qualified deferred compensation
coverage isn’t usually gratis, most companies        Salary safety net                                     plans work like a traditional IRA, whereby the
ask employees to pay just a small percentage         Life and disability insurance are also offered        employee pays taxes only when she accesses
of the premiums based on the level of service        by many forward-thinking employers. Group             the funds. The amount the employee and em-
you choose.                                          life insurance is often provided at no cost to        ployer can contribute to the plan is limited.
                                                     employees, but you can purchase additional
The most common medical plans are HMOs               coverage (standard plans offer the equivalent         In a nonqualified deferred compensation plan,
(health maintenance organizations), PPOs             of one year’s salary) if you tend to worry about      there is no limit to the amount of money you
(preferred provider organizations), POSes            accidental death or dismemberment.                    can sock away. This option is usually available
(point of service plans), and indemnity plans                                                              only to top company brass. There are a variety

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PERSONAL FINANCE                                                                                                            1.800.973. 1177

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of plans that fall under this umbrella, each      Still, it pays to know what your boss is offer-    The Motley Fool’s benefits do not include a
with its own tax consequences.                    ing. There are two types of options offered        cute shoe stipend, much to Dayana Yochim’s
                                                  by employers — ISOs and NSOs. You won’t            dismay. Still, that doesn’t stop her from
As with any investment, know what you’re          pay taxes on profits of ISOs (incentive stock      shopping on the clock. The Fool’s disclosure
buying, and make sure it’s the best place for     options) until you sell. However, when you         policy is a bargain at any price.
your money. Sometimes it’s better for your        buy (or “exercise”) NSOs (nonqualified stock
long-term financial health to invest outside      options), the transaction is treated as tax-       This feature may not be reproduced or dis-
of an employer-sponsored plan. Here’s a           able income by Uncle Sam. When you sell            tributed electronically, in print or otherwise
general pecking order and guidelines of what      (hopefully at a profit), the profits are treated   without the written permission of uclick and
money to put where.                               as regular income — which usually is at a          Universal Press Syndicate.
                                                  higher tax rate than that of capital gains
My colleague, Robert Brokamp, has a few           taxes.
“wacky” ideas about how to best manage
your 40(k), particularly if the investment       ESPPs (employee stock purchase plans) also
choices your employer offers aren’t quite up      offer options for purchase during a predeter-
to snuff.                                         mined time period. Stock may be offered at
                                                  a discount, and plans are either “qualified”
Company ownership                                 (exempt from taxes at the time of purchase)
Eyeing a seat on the board of directors? If       or “nonqualified” (fewer tax breaks). If your
you amass enough company stock, you may           company offers an ESOP (employee stock
get an invitation and a key to the executive      ownership plan), your employer purchases
washroom. Employee stock options entered          company shares for you, and the shares vest
the common lexicon in the 990s. Employees        during the time of your employment. Those
(or sometimes only company executives) can        shares can be handed over to you when you
purchase options at a preset price during a       leave or, occasionally, distributed earlier.
prescribed period of time. If the company’s
share price rises during that time, share-        Finally, there are phantom (or “shadow” or
holders can sell (or “exercise”) their stock      “unit”) stock plans. These options are doled
and pocket a profit.                              out on a limited basis and are usually based
                                                  on the company’s share price performance.
Here’s the problem (you saw this coming,          Most are qualified plans and are used as
right?): Enron . WorldCom (aka MCI (NYSE:         incentives for corporate executives.
LU). The list goes on.
                                                  Before you get back to work
According to the Employee Benefits Re-            The Certified Financial Planner Board of
search Institute and the Investment Company       Standards encourages employees to review
Institute, nearly one-quarter of employees        employer-provided benefits regularly and fill
over the age of 60 had more than half of their    in the gaps with outside financial services or
40(k) assets in their employer’s stock, and      products.
6% of them entrusted 80% of their retire-
ment savings to the performance of their          If you feel unqualified to even assess what
company.                                          you need, here’s a crib sheet for money
                                                  literacy. And to help you procrastinate even
As too many employees discovered in the           more, here’s some weird financial news.
past decade, the road to instant riches is not    Just make sure that you’ve got real work
paved with employee stock options. Taxes          you can quickly pull up on your computer
and timing issues can wreak havoc on your         screen when you hear your boss rounding the
finances. (If you’re a real martyr, here are 0   cubicle corner.
other ways to mismanage your 40(k).)


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Description: The most common medical plans are HMOs (health maintenance organizations). PPOs (preferred provider organizations). Tax wise, qualified deferred compensation plans work like a traditional IRA.
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