HSAs: An important tool to combat economic uncertainty

Consumers across the country are feeling the impact of continued high inflation and surging prices in every aspect of their day-to-day lives. They are looking to employee benefits as a way to soften that impact. As open enrollment approaches, employers must ensure that employees have access to all of the benefits, tools, and education that will support their physical, mental, and financial health. 

For employers, getting the right mix of benefits that provide both cost savings and flexibility is critical for retaining current employees and attracting new ones. According to a recent study of HR leaders that Lively conducted with CITE research, employers are facing an average of 20% annual turnover. In response to employee demand, 84% of HR leaders surveyed had increased their companies’ benefits, and 56% improved health care coverage. However, in order for these benefits to be effective in driving retention, employees must know how to utilize them and be aware of the concrete advantages they provide. This requires a clear line of communication between the employee and employer, as well as utilizing educational opportunities for a greater understanding as this year’s open enrollment season approaches. 

Make this year’s open enrollment count

For many employees, open enrollment can feel like a perfunctory, “check-the-box” exercise. In fact, a study shows that employees only spend an average of 18 minutes enrolling in benefits for themselves and their families. However, with the right benefit offerings and education, open enrollment is an opportunity for Americans to strategically rethink their approach to health care spending and saving. 

As open enrollment approaches, it’s crucial that employees are aware of the following: 

• Changes to current plan offerings
• Out-of-pocket expenses associated with each plan option
• Potential tax savings related to specific plans 
• Employer contribution matching opportunities  

While employees want to know how their benefits address their health needs, they also want to know how their benefits can directly impact their wallets and budgets. In fact, according to Lively’s research, 80% of HR leaders feel that offering competitive financial benefits is more important for attracting and retaining employees than it was a year ago. This year, employers must clearly communicate expenses, and savings associated with the benefits they offer. 

An HSA can add money to employees’ pockets 

As uncertainty of the macroeconomic climate continues, budgets are tightening for both employers and employees. Offering a Health Savings Account (HSA) can benefit both employers and employees. For employees, HSAs allow them to build savings through its triple-tax advantages, as well as access greater choice when it comes to health insurance coverage. For employers, HSAs contribute to FICA savings, an important, and often misunderstood, savings modality.

Employees are looking to stretch their dollar and strengthen their savings amid inflation, and HSAs are designed as a tax-free savings vehicle specifically for health-related expenses. HSAs offer a triple tax-advantage: tax-deductible contributions, tax-free interest and potential investment growth, and tax-free withdrawals for qualifying medical expenses. They are fully tax-deductible up to the IRS-determined contribution limit, which, in 2023 will be $3,850 for individuals and $7,750 for families. 

HSAs offer employees flexibility and a strategic approach to short and long term savings. HSAs are transferable from job to job and never expire, meaning an account holder can build their balance year-to-year and decide when and how they want to spend their HSA dollars. Individuals can use their HSAs for day-to-day health-related expenses, protect against a big health expenditure later on, or build up savings for retirement.  

Additionally, HSAs drive savings and enable greater flexibility for both employees and employers. Contributions, including employer matching, made from payroll are FICA tax exempt. In addition, because HSAs must be paired with a high deductible health plan (HDHP), these plans tend to be cheaper for employers to offer and enable employees to decide how they spend their health care money.

Read more: Help your employees make the most of their HSA this tax season

To help employees understand the advantages of an HSA, it’s important to work with a provider who takes the burden of education off of the employer. For optimal use, HSAs should cater to employees through providing easy-to-use mobile apps and desktop dashboards, debit cards, and a straightforward reimbursement process for qualifying expenses. 

Workers are searching for ways to plan and save for an unexpected future. With open enrollment approaching, adding an HSA to your benefits offering gives employees access to more options for saving at a time when many are reporting an uptick in financial stress. When employees understand that their benefits enable flexibility, choice, and savings, everyone wins.