Here's the top HSA concern for plan sponsors
Plan Sponsor Council of America HSA survey reveals top employer priorities as well as opportunities for those who help them.
Interest in health savings accounts is on the rise, but there is still a gap in understanding about how HSAs work and how they can be used as a retirement savings tool. According to the Plan Sponsor Council of America’s (PSCA) 2021 HSA Survey, education about HSAs remains a key goal for plan sponsors.
More than half of organizations that responded to PSCA’s survey indicated they primarily educate employees about HSAs annually during open enrollment sessions, while about one-quarter continue education efforts throughout the year, the survey found.
Larger organizations were more likely to offer education throughout the year while smaller organizations tended to provide education only at open enrollment. The top goal of employers surveyed when educating their employees about HSAs is explaining their tax benefits, followed distantly by providing information about contribution limits and the HSA-qualifying health plan.
About 40 percent of employers who responded to the survey said they position HSAs as part of a retirement savings strategy, and an additional 11 percent said they plan to do so in the future.
“Indeed, a 2020 survey by Optum Bank and Empower Retirement found that even employees who have an HSA often don’t understand how they work, or how contributions can grow, and most have no idea how much health care will cost in retirement,” the report said.
“That said, the survey also found that workers are open to learning more from employers, especially when they see the benefits of an HSA. This apparent gap between workers’ knowledge and their desire to know more about these options, coupled with employer priority on education concerns, suggests that the gap is known, but not yet fully resolved. It may also mean that the transition in positioning HSAs from a health benefit to a retirement consideration is still a work in progress.”
The interest in better educating employees comes at a time when HSA uptake and contributions are on the rise.
Nearly 60 percent of employees elected to enroll in an HSA-qualifying health option when it was offered to them, the survey found, and more than 80 percent of those who had an HSA made contributions to their account.
On average, participants in 2020 contributed about $3,000 to their HSAs, up from $2,595 in 2019. The average account balance at the end of last year was $6,318, up from $5,627 in 2019.
Most employers (83.2 percent) contribute to their employees’ HSAs, with most choosing to offer a set dollar amount based on either single or family coverage. About one-third of employers make their entire contribution at the beginning of the year, while about 40 percent distribute contributions each pay period, the study found.
In addition, the majority of companies stayed the course last year and did not make changes to their HSA contribution levels as a result of the pandemic, according to the study. Less than 3 percent reduced contributions and less than 1 percent suspended contributions.
However, only 2.6 percent of all organizations surveyed expect to increase their contribution this year if premiums go up.
Most organizations offer investment options for HSA contributions beyond a cash equivalent or money market, although nearly 80 percent require a minimum balance of $1,000 or more before assets can be invested.
However, only about 20 percent of participants invested assets when they were given that option. About one-third of all HSA assets are invested in something other than cash or cash equivalents, according to the study.
The study pointed to a potential missed opportunity for employers to solicit HSA rollovers for newly hired employees, with less than 20 percent indicating they do so. More than 60 percent of employers indicated they pay HSA maintenance fees for active employees, while 29 percent pass those fees along to employees.
Most fees are paid monthly and average less than $3 per month. Nearly all respondents said they use their benefits broker to develop their HSA program, and the feature they most want is availability of a debit card followed by 24/7 customer service and employee engagement and communication.
This is the third HSA benchmarking survey PSCA has conducted to examine how employers structure HSA programs, how employees use them and their potential as retirement savings vehicles. The survey included responses from 191 organizations that offer HSAs of various sizes and from a wide range of industries.
Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM’s Retirement Advisor magazine and LifeHealthPro online channel. She also was a reporter for Business Insurance magazine covering workers compensation topics.
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