Choosing a Health Plan
Most employers offer two to four medical plans, typically a traditional PPO or HMO and a high-deductible plan that qualifies for an HSA.
Compare Total Cost, Not Just the Premium
The right comparison is the yearly premium, plus what you'd expect to pay out of pocket, minus any employer HSA contribution. Here's an illustrative example for single coverage:
| Yearly Cost | PPO | High-Deductible Plan + HSA |
|---|
| Your premium | $1,800 ($150/mo) | $720 ($60/mo) |
| Deductible / out-of-pocket max | $1,000 / $4,000 | $2,000 / $5,000 |
| Employer HSA deposit | — | −$500 |
| Total, light year ($500 of care) | $2,300 | $720 |
| Total, moderate year ($3,000 of care, 20% coinsurance) | $3,200 | $2,420 |
| Total, worst case (hit the out-of-pocket max) | $5,800 | $5,220 |
In this example the high-deductible plan wins in every scenario, which is common when the employer funds the HSA and the premium gap is large. It also leaves room to put the $1,080 premium difference into the HSA tax-free. Run your own plan's numbers, though. If the employer adds nothing to the HSA and the PPO's out-of-pocket maximum is much lower, a PPO can come out ahead for someone with steady, predictable costs. The real risk with a high-deductible plan is cash flow: you need the deductible available in January if something happens early in the year.
Networks, Prescriptions, and Your Doctors
Before comparing prices, search each plan's provider directory for your doctors and your preferred hospital system, and check each plan's drug list (formulary) for your prescriptions. In North Carolina, some plans are built around one system, such as Atrium, Novant, Duke, UNC Health, or ECU Health. A narrow-network plan with a low premium is a bad deal if your specialist is out of network. Also check whether a plan covers care out of state if a family member is in college elsewhere.
Covering a Spouse and Children
Family coverage is where costs climb fastest. Many employers charge a spousal surcharge, often $50 to $150 a month, if your spouse has coverage available at their own job, so compare covering everyone on one plan against each spouse taking their own employer's plan with the kids on whichever is cheaper. Since 2023, family members can also qualify for marketplace subsidies if employer family coverage costs more than 10.22% of household income in 2027, even when your employee-only coverage is affordable. Our NC marketplace guide shows what that coverage costs. North Carolina state employees, teachers, and retirees choose through the State Health Plan, which has its own rules and dates; see our State Health Plan open enrollment guide.
HSA vs. Health FSA
Both accounts pay medical costs with pre-tax money, but they work very differently.
The HSA: The Best Tax Deal in the Code
A health savings account is available only with a qualifying high-deductible plan. Contributions are pre-tax, the money can be invested and grows tax-free, and withdrawals for medical costs are tax-free at any age. North Carolina follows the federal treatment, unlike a few states that tax HSAs. The money is yours: it doesn't expire, it stays with you when you change jobs, and after 65 you can withdraw it for any purpose and pay only ordinary income tax, like a traditional IRA. Contributing through payroll rather than on your own also avoids Social Security and Medicare tax. For a single filer in the 22% bracket, a full $4,500 contribution saves about $1,490 in 2027 taxes. Our NC HSA guide covers investing the account and saving receipts for later reimbursement.
The Health FSA: Use It or Lose It
A health FSA works with any plan and can fund up to $3,500 in 2027. Unlike an HSA, your full annual election is available on January 1, even though you fund it a paycheck at a time. The catch is that unspent money is forfeited at year-end, unless your plan offers either a carryover of up to $700 or a grace period of up to two and a half months (a plan can offer one, not both). Elect only what you're confident you'll spend: predictable costs such as copays, prescriptions, glasses or contacts, dental work, and orthodontics. Over-the-counter medicines and menstrual products also qualify.
Why You Usually Can't Have Both
A regular health FSA makes you ineligible to contribute to an HSA, and the rule applies if your spouse has a general FSA that can cover you too. If you're choosing a high-deductible plan, look for a limited-purpose FSA, which covers only dental and vision costs and is HSA-compatible. That lets you max out the HSA for long-term savings and run predictable dental and vision costs through the FSA.
Dependent Care FSA and the Child Care Credit
For families paying for day care, before- and after-school care, or summer day camp, this is often the most valuable election on the page, and both the account and the credit got bigger in 2026.
The $7,500 Dependent Care FSA
Starting in 2026, federal law raised the dependent care FSA limit from $5,000 to $7,500 per household ($3,750 if married filing separately), the first increase in decades. It covers care for children under 13, or for a spouse or other dependent who can't care for themselves, so you and your spouse can work. Overnight camps, private school tuition for kindergarten and up, and care by your own child under 19 don't count. The limit is per household, so if both spouses' employers offer the account, coordinate so your combined elections stay at $7,500. Unlike a health FSA, you can be reimbursed only for money already contributed.
The New 50% Child Care Credit
The child and dependent care credit also changed in 2026. It's still based on up to $3,000 of care costs for one child or $6,000 for two or more, but the rate now starts at 50% for adjusted gross income of $15,000 or less. It drops one point for each $2,000 of income above that to 35% and stays at 35% until $75,000 of income ($150,000 married filing jointly). Above that it declines gradually, reaching 20% at about $105,000 ($210,000 joint). The credit isn't refundable, so it only helps if you owe federal income tax.
Which One Wins
You can't use the same dollars for both. Every dollar run through the FSA reduces the $3,000 or $6,000 of costs eligible for the credit, so a full $7,500 FSA election uses up the credit entirely. Take a married couple with $120,000 of income, two kids, and $12,000 a year of day care:
- Dependent care FSA: $7,500 × about 33% (22% federal, 7.65% FICA, 3.49% NC) = about $2,490 in tax savings.
- Credit only: 35% × $6,000 = $2,100.
The FSA wins for most middle- and higher-income families, and the gap grows above $150,000 of joint income as the credit rate falls. Families in the 12% federal bracket should compare both. There the FSA saves about 23 cents per dollar, so the 35% to 50% credit rate can come out ahead, as long as they owe enough federal tax to use it. Our NC child tax credit guide covers the other child-related breaks on your return.
Life and Disability Insurance
These elections get less attention than health plans but protect against much larger losses.
Group Term Life Insurance
Many employers provide basic life insurance worth one or two times salary at no cost, and offer more as a payroll deduction. The first $50,000 of employer-paid coverage is tax-free. Coverage above that creates a small amount of taxable "imputed income" on your W-2, calculated from an IRS table by age. Supplemental group life is convenient, but for a healthy person under 50 it is often more expensive than an individual term policy, and it usually ends or gets more expensive when you leave the job. Use workplace coverage as a base, and compare individual term quotes if you need a large amount.
Disability Insurance Matters More in NC
North Carolina has no state disability insurance and no state paid family leave program, unlike states such as California, New York, New Jersey, Rhode Island, and Hawaii. If you can't work because of an illness, injury, or a difficult pregnancy, employer short-term and long-term disability coverage may be your only income replacement besides savings. If you're offered disability insurance, take it. If you have a choice, paying the premium with after-tax money makes any benefits you later receive tax-free, which matters more than the small tax savings on the premium. Expecting parents should read our guide to NC maternity leave laws before enrolling, because short-term disability is typically what pays during the recovery period after birth.
Supplemental Insurance: Usually a Pass
Accident, critical illness, hospital indemnity, and cancer policies pay a fixed cash amount if a specific event happens. They are heavily marketed during open enrollment and usually pay out far less in benefits than they collect in premiums. For most people an emergency fund, or the HSA dollars you'd otherwise spend on these premiums, does the same job more cheaply. The main exception is someone on a high-deductible plan with little savings who wants a cushion for a hospital stay.
Retirement Elections
Retirement contributions can usually be changed any time, not just at open enrollment, but it's a good moment to revisit them.
Get the Full Match First
If your employer matches 401(k) or 403(b) contributions, contribute at least enough to get the full match before putting extra money anywhere else. A 50% match on 6% of pay is an instant 50% return. Check your plan's vesting schedule, too, since matching dollars may not fully belong to you until you've worked there two to six years.
2026 Limits and What's Coming for 2027
For 2026 you can defer up to $24,500, plus an $8,000 catch-up at age 50 or older, or $11,250 at ages 60 to 63. Starting in 2026, employees who earned more than $150,000 in Social Security wages the year before must make catch-up contributions as Roth. The 2027 limits will be announced shortly. Government employees with both a 401(k) or 403(b) and a 457(b) plan can max out both, which doubles the amount they can save. Our NC 401(k) guide goes deeper.
Traditional or Roth With NC's Falling Rate
North Carolina's rate is dropping to 3.49% in 2027 and is scheduled to fall further, to 2.99% by 2033. Retirees in NC pay state tax on traditional 401(k) and IRA withdrawals (with an exception for some long-time government retirees under the Bailey settlement), but Social Security is exempt. A lower state rate makes Roth contributions slightly less attractive for NC workers who expect to retire here, because the state tax you'd save now is small. The federal bracket you're in now compared with the one you expect in retirement is still the main factor. Our Roth IRA guide covers that decision.
Other Benefits Worth a Look
The last screens of a benefits portal are easy to click past, but a few are worth a look.
Commuter Benefits
If you pay for parking at work or use transit, a commuter benefit lets you pay up to $350 a month for each in 2027 with pre-tax dollars. That's useful in uptown Charlotte and downtown Raleigh, where monthly parking often runs $150 to $250. Someone paying $200 a month for parking saves about $800 a year in the 22% bracket. Unlike a health FSA, unused commuter money generally rolls over month to month while you stay in the plan.
Legal Plans, Identity Protection, and Pet Insurance
Group legal plans, often $15 to $25 a month, cover attorney consultations and simple services such as wills, real estate closings, and traffic tickets. They can be worth it in a year you're buying a house, since NC requires an attorney at closings, or writing a will. Identity theft monitoring and pet insurance are paid with after-tax money and rarely cheaper than buying on your own, so compare before enrolling.
Free Benefits You Don't Have to Elect
Check whether your employer offers an employee assistance program (EAP), which usually includes several free counseling sessions plus financial and legal consultations. Many also offer tax-free tuition assistance of about $5,250 a year, adoption assistance of up to $18,250 tax-free in 2027, wellness incentives that lower premiums, and student loan repayment help. These often don't require an election but are easy to miss.
Frequently Asked Questions
Can I change my benefits after open enrollment ends?
Generally only if you have a qualifying life event, such as marriage, divorce, a birth or adoption, a spouse losing or gaining coverage, or a move that changes which plans are available. You usually have 30 days after the event to make the change, and it must match the event. A new baby lets you add the baby and adjust your dependent care FSA, for example, but doesn't let you switch from a PPO to an HMO for no reason. HSA contributions and 401(k) deferrals can be changed at any time.
Do pre-tax benefits lower my North Carolina taxes?
Yes. North Carolina starts from federal adjusted gross income, so health premiums, FSA and HSA contributions, commuter benefits, and 401(k) deferrals taken pre-tax through payroll also lower your NC taxable income. At the 2027 rate of 3.49%, every $1,000 of pre-tax benefits saves $34.90 in NC tax, on top of the federal savings. Use our NC paycheck calculator to see how your elections change your take-home pay.
How much should I put in my health FSA?
Add up costs you're confident about: regular prescriptions, copays for planned visits, a new pair of glasses, and scheduled dental work. Then subtract a cushion so you don't forfeit money. If your plan offers a $700 carryover, you can be a bit more aggressive. If you have a qualifying high-deductible plan, skip the general FSA and use an HSA plus a limited-purpose FSA instead.
Should I pick a high-deductible health plan?
Often yes, especially if your employer contributes to the HSA and the premium savings are large. Run the light-year, moderate-year, and worst-case totals for each plan. The high-deductible plan usually wins for healthy people and frequently for families too. It's a weaker choice if you have little savings to cover the deductible, or ongoing expensive care where a PPO's lower out-of-pocket maximum would save you money.
