Employers face challenges with offering health savings accounts
Communicating to employees the investment and pre-tax benefits of an HSA for one, but there are more.
Despite the increasing popularity of health savings accounts, employees do not use the pretax vehicles as investment options, according to a survey this month by Plan Sponsor Council of America, part of the American Retirement Association.
According to the survey, 51.5% of employers offer health savings accounts as retirement savings options but admit that’s not altogether clear to employees.
The survey found employee education to be their primary concern about HSAs for 56.1% of respondents, down slightly from 61.4% in 2018. Employers are slowly starting to educate employees about HSAs throughout the year — and not just during the annual open enrollment period for healthcare plans.
“HSAs are more evolutionary than revolutionary,” said Jack Towarnicky, principal researcher for the American Retirement Association, whose members are plan sponsors. “The survey does confirm that not that much changed from 2018 to year end 2019. And we have seen some modest changes in communications and marketing, especially around annual enrollment, and a little bit more focus mid year.”
The survey, sponsored by Empower Retirement, reported data from 181 employers that offer HSA-qualifying health options in 2019.
Among the challenges, Towarnicky said, is that employers don’t offer HSAs with the same options available in 401(k) plans, such as automated features.
“In the 401(k) market, a lot of employers, 60% or more, have adopted automotive features,” he said. “For example, HSAs haven’t seen the adoption of automatic enrollment, or mid-year automatic increases, when it comes to opening health savings accounts or increasing contributions to their account.”
That’s not surprising, he said, because HSAs, unlike 401(k)s, fall somewhere between health care and financial planning; many employers are focused on making sure workers have the appropriate amount of money available to cover out-of-pocket expenses for their health care costs.
Another challenge is the amount of money employees are able to invest. About 83.8% of employers offered investment options for HSA contributions, but most required a minimum balance of at least $1,000, according to the survey.
The average employee contribution in 2019 was $2,595, the same as in 2018, while the average account balance was up slightly from $5,239 to $5,627.
That means employees aren’t saving enough, Towarnicky said.
“What you have is a situation where a lot of folks will think of it as their flexible spending account, and they’ll put in there the amount of money they’ll spend in the next 12 months, so they don’t think beyond that period of time,” he said. “The second challenge is a lot of folks are still living payday to payday, so they’re pretty much crimped for cash.”
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