Employee HSA confusion is an opportunity for advisors

The pandemic has further aggravated existing problems with HSAs, namely a lack of awareness about their advantages.

Financial wellness programs that include HSA education can be game-changing for advisors seeking to build relationships and stand out from their peers.

When advisors understand the role that health savings accounts play in financial wellness, they are positioned to help plan sponsors integrate HSAs with long-term retirement savings.

Related: HSAs for all: Unleashing the potential of health savings accounts

The pandemic has further aggravated existing problems with HSAs, namely a lack of awareness about their advantages, as well as a general misunderstanding of how they work. This is an opportunity for advisors to add value beyond retirement planning by offering holistic financial wellness education that boosts HSA enrollment and participation.

Kris Alban is executive vice president of iGrad, a San Diego-based financial technology company that provides artificial intelligence-powered financial wellness solutions to employers, financial institutions, colleges and universities.

Benefits of HSA participation

Employers can save money on health insurance premiums by offering HSA-qualified, high-deductible health plans. They also benefit in several key ways when employees use HSAs to their full potential:

A recent survey by Plan Sponsor Council of America found half of employers offer HSAs in their benefits package, but 69% of employees are not clear on the benefits or uses, meaning they’re missing tax advantages and opportunities to increase savings.

HSAs also help employees more easily manage their health care costs, which is a factor in overall employee financial wellness and a significant source of financial stress.

Combating HSA confusion

Many confuse HSAs with FSAs, which have to be used within a given year. Unlike FSAs, HSA contributions roll over year to year, making them great vehicles for saving. Employees can invest in mutual funds to grow savings tax-free in the same vein as a 401(k).

A Health Accounts Employee Attitude Survey shows only 8% of employees get the full benefit of HSA tax advantages, likely because they aren’t aware of or don’t understand them:

Financial wellness and health insurance literacy

Financial wellness programs that include HSA education can be game-changing for advisors seeking to build relationships and stand out from their peers.

Financial wellness education can help spur HSA enrollment and use. Studies suggest those with lower levels of understanding of health insurance concepts were less likely to put money in their HSA and much less likely to have opened an HSA or contributed if they did have one.

Financial wellness education can teach about HSAs in the context of emergency savings and retirement planning, not just health care elections. This is a win for plan sponsors, participants and advisors.

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