How to Choose Your Employee Benefits: A Guide for High Earners

Sep 7

By Novak Financial Partners · Updated August 2026

For high earners, choosing employee benefits is less about picking basic coverage and more about cutting your tax bill, protecting your income, and building extra tax-advantaged savings. The elections that matter most are usually capturing the full 401(k) match, maxing out an HSA when the health plan fits, checking whether your plan supports a mega backdoor Roth, and closing the disability insurance gap that standard group coverage leaves at higher incomes.

Key takeaways

Employee benefits can be one of the biggest tax-planning and risk-management opportunities for high earners
An HSA can be incredibly valuable, but don't choose a worse health plan just to get access to one
High earners should intentionally choose between pre-tax and Roth 401(k) contributions rather than sticking with the default
If your 401(k) allows a mega backdoor Roth, you may have significantly more tax-advantaged savings capacity available
Group disability coverage may replace far less of your income than you expect, especially once you hit the monthly benefit cap
RSUs, stock options, and ESPPs should be coordinated with your taxes, investments, and savings strategy

Most people click through their benefits elections quickly. Pick a health plan, accept the retirement defaults, move on. That's fine most years.

For high earners, though, defaulting can cost real money. Between tax-advantaged accounts, income protection, and equity compensation, a benefits package can easily be worth tens of thousands of dollars a year. The goal isn't finding the richest coverage. It's knowing which elections cut your tax bill, which ones protect income you can't easily replace, and which ones you're missing simply because nobody pointed them out.

This matters most during open enrollment, but it's not a once-a-year decision. A new job, a raise, a growing family, or a change in equity compensation are all good reasons to take another look.

Where to start: a simple order of priorities

Not everything here matters equally. If you're short on time, this is roughly the order we'd walk through with a client.

1. Capture the full employer 401(k) match. This is the closest thing to a guaranteed return in your financial plan.
2. Figure out whether an HSA-eligible health plan actually fits your household's health needs and budget.
3. Max out the HSA when that plan makes sense. The tax treatment is hard to beat.
4. Decide between pre-tax and Roth 401(k) contributions based on your current and expected future tax rates.
5. Check whether your plan supports a mega backdoor Roth, and evaluate whether it makes sense if cash flow allows.
6. Review disability and life insurance gaps left by your group coverage.
7. Coordinate RSUs, stock options, or an ESPP with the rest of the plan, since they affect cash flow and concentration risk.

The rest of this guide walks through each of these in more detail.

Health coverage and the HSA decision

Most benefits guides spend most of their time comparing PPOs, HMOs, and premium tiers. For a high earner, the bigger question is usually whether a high-deductible health plan paired with a Health Savings Account is the right fit, and that decision should start with the health plan itself.

Start with the health plan, not the tax benefit

An HSA only comes with a qualifying high-deductible health plan, so start there. Compare the premium difference against the deductible and out-of-pocket maximum, and be honest about how much healthcare you'll actually use. If you're managing a chronic condition, expecting a baby, or planning a procedure, a richer PPO plan may still come out ahead. Compare annual premiums, employer HSA contributions, deductibles, coinsurance, and out-of-pocket maximums under a few realistic healthcare scenarios. Some employers also contribute to employees' HSAs directly, which changes the math and is worth checking before you compare plans on premium alone.

When the HDHP fits, the HSA is one of the best accounts available

If the HDHP is a reasonable fit, the HSA offers a triple tax advantage that's hard to match elsewhere. Contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free too. For 2026, you can contribute up to $4,400 for self-only coverage or $8,750 for family coverage, plus another $1,000 once you turn 55. Unlike an FSA, unused HSA funds roll over and can be invested, which is why a lot of high earners who can afford to pay medical bills out of pocket end up treating it as another retirement account.

If you don't go with a high-deductible plan, an FSA still has a role. It lowers taxable income on predictable expenses. The 2026 healthcare FSA limit is $3,400, with up to $680 allowed to carry over if your plan permits it. If both an HSA and an FSA are on the table, a limited-purpose FSA for dental and vision lets you keep contributing to the HSA without losing that tax benefit.

Retirement and tax-advantaged growth

This is usually where the biggest dollars are, and there's a rule change for 2026 worth flagging before you make your elections.

Capture the match, then decide on the rest

The 2026 employee deferral limit is $24,500, with an $8,000 catch-up if you're 50 or older, and a higher $11,250 catch-up if you're 60 to 63. Before you front-load contributions, check whether your employer offers a year-end true-up. Without one, maxing out your deferral early in the year can mean missing part of your match. Beginning in 2026, if your prior-year wages from the employer sponsoring the plan exceeded $150,000, your catch-up contributions generally must be made as Roth contributions. Confirm that with your plan administrator before you elect it.

Pre-tax versus Roth 401(k) contributions

High earners shouldn't just default to one or the other here. Pre-tax contributions cut your taxable income today, which matters more the higher your bracket. But the deduction isn't automatically the better choice. Roth contributions give that up in exchange for tax-free withdrawals later, which can win out if you expect your future rate to be similar or higher, or if you already have a large pre-tax balance and want some tax diversification in retirement. There's no single right answer. It comes down to your current rate, your expected future rate, and how your existing balances are split, which is why it's worth revisiting rather than leaving on autopilot.

After-tax contributions and the mega backdoor Roth

The combined 2026 limit on employee deferrals, employer contributions, and after-tax contributions is $72,000. If your plan allows after-tax, non-Roth contributions, and either in-service withdrawals or in-plan Roth conversions, you can often push a lot more money into Roth than the standard limits allow. That's what people mean by a mega backdoor Roth. Not every plan supports it, so check your plan document or just ask HR rather than assuming it's there.

Non-Qualified Deferred Compensation (NQDC)

If your employer offers an NQDC plan, deferring income can work well, but it comes with tradeoffs. Deferred amounts are generally unsecured, meaning they're exposed to the company's financial health, and the payout schedule is usually locked in once you elect it. Deferring makes the most sense if you expect a lower tax bracket when the money comes out, and if you're comfortable carrying that credit risk in the meantime.

RSUs, stock options, and ESPPs

Equity compensation isn't technically a benefits election, but it interacts directly with the decisions above, so it's worth reviewing at the same time.

RSUs and stock options

RSUs are taxed as ordinary income the moment they vest, whether or not you sell. Plan for that tax bill ahead of time, especially since your employer's default withholding often doesn't cover your actual marginal rate. ISOs work differently. Exercising a large batch in one year can trigger the alternative minimum tax, so it's worth mapping out the timing and size of an exercise with a tax or financial professional before a vesting or exercise window opens, not in the moment.

Employee Stock Purchase Plans (ESPPs)

A qualified ESPP typically lets you buy company stock at a discount, often with a lookback provision that prices the purchase off whichever is lower: the price at the start or end of the offering period. That alone can be a built-in return before the stock moves at all, which is why it's often worth participating even if you don't want more exposure to your employer's stock. Selling shortly after purchase, rather than holding for a long-term gain, is a reasonable move for a lot of high earners since it locks in the discount without adding concentration risk. The tradeoff is a fast sale is usually taxed at ordinary income rates instead of getting more favorable treatment, so weigh the guaranteed discount against that.

The reason this matters for everything else on the list is cash flow. A big RSU vest, a planned ISO exercise, or ESPP proceeds you're planning to sell can change how much room you have to max an HSA, adjust your 401(k) mix, or fund a mega backdoor Roth that year. Look at equity compensation and benefits together instead of treating them as separate conversations.

Protecting your income and assets

This is the category we see high earners underweight most often. Group coverage looks fine at a glance, and the gap only shows up once you actually read the policy.

Group long-term disability (GLTD)

Group long-term disability plans typically advertise 60% income replacement, but that percentage almost always applies only up to a fixed monthly cap. Once your income passes the point where 60% would exceed the cap, the plan replaces a shrinking share of your actual pay. For a high earner, that can mean a disability replaces far less income than the plan summary suggests, sometimes well below what it takes to cover your household's expenses. Supplementing group coverage with an individual disability policy, or an executive carve-out where it's available, is usually the fix. It's one of the more overlooked gaps we find when we review a client's existing coverage for the first time.

Group-term life insurance

Employer-paid group-term life insurance is worth using. The first $50,000 is generally income-tax-free, and anything above that is subject to some modest imputed income. But it shouldn't replace properly sized individual coverage. It isn't portable if you change jobs, and the amount is rarely enough on its own for a household that depends on your income. If you actually need income replacement, an independent term policy sized to that need is usually worth adding on top of the employer benefit, not instead of it.

Smaller benefits still worth a look

None of these carry the same dollar impact as the categories above, but they are easy to overlook during a rushed enrollment window and can add up.

A dependent care FSA, if you have childcare or eldercare expenses, lowers taxable income on costs you are already paying
Commuter and parking benefits, which are pre-tax and easy to set up once and forget
Legal and identity theft protection plans, which are inexpensive and occasionally worth having

The biggest mistake we see

The most common mistake isn't necessarily choosing the wrong benefit. It's carrying forward last year's elections without a second look, even after income, family circumstances, equity compensation, cash flow, or financial goals have changed.

A benefits package that made sense two years ago might not make sense now, and the enrollment window rarely makes anyone check. A few minutes spent revisiting things, especially after a raise, a new kid, a vesting change, or a shift in your savings goals, is usually enough to catch what autopilot missed.

Why this shouldn't be optimized in isolation

You can get every decision above right individually and still leave money on the table. Your HSA election affects your tax bracket. Your pre-tax versus Roth split affects your other retirement accounts. Your disability coverage should reflect your actual expenses and savings, not a generic rule of thumb.

At Novak Financial Partners, we look at employee benefits alongside taxes, investments, equity compensation, insurance, and cash flow, not as a separate checklist you deal with once a year during open enrollment. A benefits package optimized on its own can still leave money or risk on the table if it's not coordinated with everything else in your plan.

Frequently asked questions

What benefits should high earners maximize?

Generally the full 401(k) match, an HSA when the health plan makes sense, a mega backdoor Roth if your plan allows it, and disability coverage that closes the gap left by standard group insurance. The right order depends on your plan and tax situation.

Is an HSA worth it for high-income earners?

Often, but only if the required high-deductible plan is actually a good fit. The triple tax advantage is hard to match elsewhere, but start with premiums, deductible, and expected medical usage, not the tax benefit alone.

Should high earners use a Roth or pre-tax 401(k)?

It depends on your current tax rate versus your expected rate in retirement, and how much you already hold in pre-tax versus Roth accounts. There's no default right answer, which is why it's worth reviewing rather than leaving on autopilot.

How do I know if my 401(k) allows a mega backdoor Roth?

Check your plan document or ask HR whether it allows after-tax, non-Roth contributions and either in-service withdrawals or in-plan Roth conversions. Both need to be there for the strategy to work.

Is employer disability insurance enough for a high earner?

Often not entirely. The advertised 60% income replacement usually applies only up to a fixed monthly cap, which can replace a much smaller share of pay at higher incomes. Supplemental individual coverage or an executive carve-out is usually the fix.

Want a second look at your benefits package?

We have a 30-minute intro call to walk through your benefits, equity compensation, and where the tax and income-protection opportunities are, coordinated with the rest of your financial plan. No obligation.

See if flat-fee planning is right for you

This article is for educational and informational purposes only and does not constitute personalized financial, legal, or tax advice. Contribution limits, tax rules, and benefit terms cited here reflect 2026 IRS figures and general plan design as of the publish date and are subject to change; confirm current limits and your specific plan's terms with your HR department, plan administrator, or a qualified tax professional. Availability of features such as mega backdoor Roth contributions, in-service withdrawals, ESPP terms, and executive disability carve-outs varies by employer and plan. Consult a qualified financial professional before making benefit elections. Advisory services are offered through Core Planning LLC, a Registered Investment Advisor. For additional disclosures please visit corepln.com/disclosures.

Max Novak