Now a decade after the initial offering of health savings accounts, we thought the time had come to dust off our proverbial crystal ball and take a look at what we can expect, hope and anticipate for HSAs in the next decade. Over the next several months we will touch on the emerging trends, tools and offerings in the HSA space and how those impact employers and employees, as well as brokers and agents.
While discussing the future of HSAs this year, we have covered the importance of understanding reporting data, taking action with those analytics and moving from spending to saving. As we move toward a savings mindset, we would like to talk about the investing option that exists with many HSAs. As HSAs mature and moneys accumulate, accountholders need to seriously consider their plans for those funds.
The long-term investment opportunity with an HSA is tremendous — likely better than any other tax-advantaged financial instrument as deposits grow tax-deferred and distributions are potentially tax-free. Many HSA providers now offer multiple investment options, including money market funds, self-directed accounts for mutual funds or individual stocks and FDIC-insured accounts for cash needs.
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While many factors will determine the actual returns these investments make, the bottom line is that regardless of the level of risk, investment options are currently underutilized. In the 2014 Midyear HSA Research Report from Devenir, it was noted that only a little over three percent of accountholders across all providers have HSA investment accounts. There is definitely room for improvement and a need for educating accountholders about their options.
As investment options with HSAs become more popular, brokers and agents will also need to consider the investment options that different providers offer and how they compare. Providers are making considerable investments in their investment platforms to ensure their offerings are competitive and appealing for accountholders.
The future of HSAs is tied closely to their value as a long-term savings vehicle and the opportunity that presents for investing. Employers, along with brokers and agents, can play an important role in educating employees about their investment options.
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