# Should I request a lower raise to avoid a health-insurance premium raise threshold?

At my company, per-year health-insurance premiums increase by \$1044 once a salary is greater than or equal to A. A does not seem to change with time, and it is the highest value where a premium increase occurs. The premiums are piece-wise constant with respect to salary.

I currently make B, such that, if I received a 2.28% raise, I would make A. I expect my new salary to be between A and (A+\$1300), with the latter being a 3.3% increase.

The only other factors that come to mind that would be affected by salary are 1) 10% company match for 401(k), and 2) raises are expressed in terms of percentages of existing salary; these percentages are functions of performance category and ratio of current salary to midpoint. Therefore, there is compounding, but the percentage can be reduced if the current salary is higher.

Based on some crude calculations that consider the premium increase and the 401(k) matching, it seems it would be better to make (A-\$0.01) than it would be to make between A and (A+\$950).

Therefore, if my new salary is between A and (A+\$950), should I request (A-\$0.01)? Are there other factors I should consider?

Update I ended up creating a spreadsheet of possible scenarios and noted the significantly more limited range for which it would take more than a couple of years make up the difference. I would have expressed concern if I ended up in that range.

Fortunately, however, my increase for this year exceeded my expectations, to the point that the premium increase was not an issue.

• I don't have an answer for you but don't forget, if you take a lower increase now, every pay increase for the rest of your tenure with the company will be lower as a result. Just... factor that in to whatever decision you come to. – corsiKa Dec 12 '18 at 4:17
• Since you write that 1300 would be a 3.3% raise, we can derive your salary anyway, while using A and B instead of actual amounts makes the whole thing a bit confusing to read. – 11684 Dec 12 '18 at 8:24
• @ilkkachu Oh then I misread. Still, we can derive the actual salary. – 11684 Dec 12 '18 at 9:39
• There is a financial Stack Exchange, you know. money.stackexchange.com – Kyle Delaney Dec 12 '18 at 17:26
• Just a heads up, if your intention was to hide your salary by using `A` and `B`, then I should point out that telling us that `B * 103.3% = B * 102.28% + \$1,300` is enough to calculate exactly what `B` is. – SamYonnou Dec 13 '18 at 14:56

Therefore, if my new salary is between A and (A+\$950), should I request (A-\$0.01)?

Assuming you are able to request raises, it would seem to make a lot more sense to request (A+\$1300).

You can use your argument about the net loss due to higher insurance costs to bolster your request.

• This is the best answer. In addition to satisfying the conditions listed in the question (and avoiding the heavy lift of changing the policies the company has explicitly chosen), it also addresses the underlying situation. If the idea is to lower premiums for workers under a certain salary, then the cliff between raise and breakeven means that the OP carries that burden personally for the company's choice. The company should pay for this odd arrangement, not the OP. – Upper_Case Dec 11 '18 at 22:21
• @Joe Strazzere Unfortunately, there is a fair amount of rigidity in place such that 1) raises are only awarded once per year, based on a matrix that accounts for performance and current compensation ratio, and 2) they aren't negotiated; at best, I'm assuming I could get it lowered. – BaronFiner Dec 11 '18 at 23:42
• @BaronFiner Could you reduce your pay in some other way that you control, for example purchasing additional holiday or increasing your pension contributions? – thelem Dec 12 '18 at 15:27
• How common is it to request a raise of at least some minimum amount and actually get what you ask for? This answer is good for the best case scenario, but is perhaps unrealistic in its expectations of success. – asgallant Dec 13 '18 at 17:16
• @BaronFiner "they aren't negotiated" They always are. You (or the company) just don't know how to do it. There's a difference. If you point out to them you're financially worse off after a raise because of their policies, I'm sure they'll see sense, or explain to you how you're wrong. – UKMonkey Dec 14 '18 at 12:08

Last time that happened at my company, we have negotiated to officially raise the salary to `A - 0.01`, but keep track of the intended salary C (being `A < C < A + 950`), so next raise would be based on C instead of `A - 0.01`.

That way, the affected employee kept the best salary they could, as the company couldn't pay `A + 950` or higher, but the employee didn't miss the `C - (A - 0.01)` raise permanently - they only refused it while it wasn't a benefit for them.

This only works if there's trust between both parties - I don't think there's a legally binding instrument to agree on this.

• "I don't think there's a legally binding instrument to agree on this." Actually, that legally binding instrument would be a contract. I see no issue with specifying this in the employement contract or an addition to it. – DonQuiKong Dec 12 '18 at 10:05
• @Don, most U.S. employees don't have an employment contract, and I doubt the company would be willing to negotiate one to solve this. – prl Dec 12 '18 at 21:50
• @prl that's a myth. When you buy your groceries, you're entering into a contract with the store. You can do that without speaking a single word. Every employee has an employment contract. It might not be in written form, but it has the same legal value. Therefore if both sides agree on having the raise happen as explained, that's a contract. It's enforceable in court. Having it in writing just helps with proving it exists and what the agreement exactly is. – DonQuiKong Dec 13 '18 at 7:25
• This is often referred to as a deferred raise. That’s a somewhat more general term, so the details would still need to be clarified explicitly, but a standard term can be helpful for getting the idea across quickly without making the arrangement sound overcomplicated. – PLL Dec 13 '18 at 13:29
• @DavidThornley it's not so much about trust, but you know, the manager changes, forgets, some kind of written agreement and many problems are gone. – DonQuiKong Dec 13 '18 at 18:07

Consider that the raise is forever. If you get 1% less salary this year (and are happy about it), you will also get 1% less salary next year, and the year after, and the year after that. You gain a bit this year, but you will lose out all the following years.

Take the raise that you can get.

• If the raise was forever, surely that would be an argument for asking for the lower raise, if the higher raise would leave the OP worse off? Or are you considering that the medical cost threshold might be increased in subsequent years? – Time4Tea Dec 12 '18 at 0:34
• Of course not. Let’s say next years raise is 2.5% and this year you pick 2% instead of 3%. Next year your total raise will be 4.5% instead of 5.5%, so you lose out. The year after that the total raise may be 7% instead of 8%, and so on. – gnasher729 Dec 12 '18 at 9:31
• Ok. I was confused by what you meant by 'the raise is forever'. I thought you meant it would be the only raise the OP would ever get (in that position). – Time4Tea Dec 12 '18 at 21:11
• This should be the accepted answer. Always take more money. Even if you lose out in the short term, you win in the long term. – asgallant Dec 12 '18 at 22:34
• This is the correct answer. – isaace Dec 13 '18 at 14:44

Your company has a perverse incentive in place, and it would be a more constructive response to lobby for it be changed than to engage in shenanigans that simply perpetuate it rather than addressing it. You're proposing responding to one form of dysfunction with more dysfunction, which is bad for the company and likely for you. If you really can't get the policy changed, you'll have to decide whether \$1000 is sufficient compensation for contributing to the dysfunction of the corporate world (and the risk of looking like an employee trying to game the system).

Health Premiums are pretax. They (a) reduce your tax liability, and (b) do not affect 401k contributions. Because of the effect on your tax liability, you will pay less in taxes in trade for more premium cost. The \$1,300 more to your gross means you'll be saving more retirement, and get a larger matching 401(k).

Even if it may seem outrageous upfront, it is pretty typical that crossing from A-\$0.01 to A will still result in a slightly larger paycheck (or, at least, not significantly smaller, usually just a few dollars) as well as not negatively affecting your 401(k). Even more so, A+\$1,300 will be a larger check than A-\$0.01 upfront and over time.

Of course, without knowing A, your salary, your tax liability, marital status, property ownership, premium differences, and so on, it's hard to say for certain if A or A-\$0.01 would be beneficial, but A+\$1,300 will definitely be beneficial overall, because it'll have a smaller tax impact because of the increased premiums, yet still be a boon for your 401(k). There's no good reason for pursuing a smaller salary in the hopes that it will produce larger paychecks, especially since it will have a negative impact on your retirement.

• The value of A is easily computable from the information given. I'm not sure why OP was cagy about saying it. – prl Dec 12 '18 at 21:49

Instead of refusing or downgrading the raise, why not ask for it to be deferred? Then you have not given up the rights to it while still keeping your pay below the all important threshold. It may also be easier for the company to implement than anything else.

I don't think you should request a lower raise.

Although the situation of having to pay more for the same health coverage isn't pleasant, requesting a lower raise would set a bad precedent for yourself. Even though it is for financial reasons, it sends the message that you don't need/want more money. The next time you are considered for a raise, they may continue with the lower raise since you previously rejected a higher one.

Also, requesting A-\$.01 means that it will take longer for you to get to A+\$950. There is no guarantee that your next raise, if you accept A-\$.01, will get you to A+\$950 ( What will you do then? Reject a raise completely? ). You could end up losing more money than the extra cost of insurance for a shorter period.

• "it sends the message that you don't need/want more money" - really? If you say "Could you make my raise into X instead because that way I get to take home more money" I don't think that would send the message that you don't want more money... – Chris Dec 12 '18 at 9:32

I'm answering this in Workplace mode, not Financial mode, as this is the Workplace stack. That is, whats best for you career wise, not what maximizes dollars and cents mathematically.

\$1044 a year is \$87/month more for insurance. Your raise would at least offset most of that increased cost. Net result is you are quibbling over a few dollars, or few tens of dollars, a month.

My advice... take the raise they offer. Don't be 'that person' who causes trouble for HR and gains a reputation of being difficult. Point it out to them if you want, but don't cause a stink over this. And instead, put this mental effort into finding some other way to save a few dollars a month.

BTW, I think making employees pay more for (presumably) the same insurance based on their income is a terrible policy.