Looking back on benefits in 2021 and what's ahead for 2022

The COVID-19 pandemic has focused attention on the importance of healthcare and greater emphasis on being prepared for the unexpected. Therefore, it was not a surprise to learn that more people put away money for future medical expenses last year—50 percent versus 41 percent in 2020, according to HSA Bank’s 2021 Health and Wealth Index. The pandemic has disrupted every aspect of American life and highlighted how critical it is to save for future healthcare needs. As the world edges closer towards “normalcy,” Health Saving Accounts (HSAs) as well as an array of other benefits will continue to play an important role in employees’ financial goals and savings.

Growing concern over savings

During a time of uncertainty, HSAs have proven their value. These tax-advantaged accounts allow employees to save money for IRS-approved expenses and spend it on a broad range of health and medical needs, including dental care, vision care and medication, both prescription and over the counter. One key benefit of HSAs is that employees can save the money without losing it—funds roll over year to year and HSA funds can also be invested to ensure savings grow even further.

Saving for future needs is a growing concern for many older Americans in particular nearing retirement. HSA Bank’s 2021 Health and Wealth Index found that 93 percent of those over 55 said they were worried about current or future medical bills, and that concern is justified. According to a recent survey by HealthView Services, an average couple age 65 who retired in 2021 will spend an estimated $662,156 on retirement medical expenses. The good news is that consumers with HSAs were found to be 17 percent more likely to save for future medical expenses than those who lack one, according to HSA Bank’s 2021 Index.

COVID-19′s impact and employee benefits

COVID-19 has had an impact on more than just healthcare. It disrupted childcare arrangements and plans for retirement. That is why it is essential for employers to offer a holistic range of benefits to cover everything from retirement to childcare to commuting expenses. Such benefits include Dependent Care Flexible Spending Accounts (DC-FSAs), Retiree Reimbursement Arrangements (RRAs), to name a few. These benefits empower employees in a way that traditional benefits cannot. While the accounts are different in nature, they have two things in common:

• They are tax-advantaged; and
• They provide account holders the flexibility to deposit, withdraw and/or utilize the funds whenever they wish to.

Benefits accounts like these do require additional employee education, and it is important for employers to explain how these accounts can truly benefit their employees’ health and wealth throughout the year by using online tools and calculators to show the real dollar savings. That is especially vital to utilize now that future open enrollment seasons will most likely continue to be conducted in a hybrid work world, both virtually and in-person.

Updated rules and regulations will affect employee benefits

One area of focus for employers in 2022 should be the updated rules and regulations that will affect employee benefits this year. One is the Consolidated Appropriations Act, a piece of legislation signed into law in late 2020, with provisions that will become effective this year. The regulations reflect a bipartisan consensus that given access to better information and more transparency, consumers will make smarter decisions about providers and services which, in turn, will lead to higher quality and more cost-effective healthcare. In the long run, that may be true. In the short run however, the law is likely to mean more work and higher costs for plan sponsors.

Another regulatory issue that employers will have to contend with this year is a perennial one—the complicated interplay among Medicare Part A, Social Security and HSAs. What this looks like in practice is once an individual is covered by Medicare he needs to stop contributing to an HSA or risk paying penalties to the IRS. Figuring out when that coverage begins is no easy task, so employers will need to be sure they provide their employees with clear and concise communications about when and how to halt their HSA contributions. Education and awareness can go a long way toward avoiding unexpected penalties and taxes.

Benefits will play a greater role in recruiting

In 2022, we see benefits playing a greater role as a tool in hiring and recruiting. With a strong labor market paired with a large talent pool, the demand for workers far outstrips the supply. The upshot—companies need to work harder to recruit new employees and retain their current workforce— and part of that effort must include a robust benefits package. A holistic range of benefits can provide a competitive edge in this market.

Benefits give employees an opportunity to save, build their wealth, and empower them to take control of their finances with flexibility and ease. These accounts have proved to be advantageous and extremely beneficial during the COVID-19 pandemic, and they will continue to be attractive to employees as the world evolves.

Kevin Robertson is Chief Revenue Officer at HSA Bank.