Entry-level employees or pre-retirees? The right HSA messaging is key

With open enrollment season in full swing (and National HSA Awareness Day being celebrated on October 15), many employers see this time as a great opportunity to help their employees understand the full potential of their health savings accounts (HSAs); however, your employees’ financial needs differ considerably depending on the stage of work they’re in. For those entering the workforce for the first time to those nearing retirement, these communications can and should be quite different.

For example, pre-retirees are more likely to be engaged in a conversation about how an HSA can be used to pay for prescription drugs, since more than half of adults age 65 and over and one-third of adults age 50 to 64 report taking four or more prescription drugs, according to KFF. Still, younger generations need to be informed of this benefit in a way that makes sense for them, for example, in regard to sports injuries; antibiotics; contraceptives; and treatments for anxiety, depression and COVID-19.

Here, we share tips for communicating the value of HSAs to these two groups at very different stages of work.

#1: Recent college grads/those new to the workforce

Employees who are completely new to the workforce have a different set of goals and needs ­— not to mention budgets —the from those who are in mid-career or close to retirement. These employees may not have had experience making benefit decisions prior to starting employment, as they may have been covered by their parents’ plans. It’s important for employers to help these employees set up good spending habits, particularly when it comes to their health and welfare benefits.

1. Use messaging that resonates with younger audiences. Employees new to the workforce have a lot on their minds, the least of which may be saving for medical expenses. They might associate “savings” with “less money for them to spend now.” They need to understand that unexpected medical expenses can occur, and it’s better to ensure that money is put away and available than to be caught off guard by these expenses later.
2. Target communications specifically for younger demographics. Employees have a lot to learn when they start a new job, and onboarding information can be overwhelming. Try these tips to improve their experience when talking about health insurance and HSAs:

Break down messages into smaller chucks so it’s easier for them to digest. Consider a campaign that is separate from general onboarding information to engage them.

Don’t stop communicating once new hires enroll in benefits. Ongoing communications about how to use and maximize benefits will help to reinforce this important information for younger employees. For example, let them know that, unlike their choice of a health plan, they can change their HSA contributions during the year as they come to understand how the plans work and develop good spending habits.

Leverage digital communications. In a survey by IBM and the NRF, 75% of Gen Z respondents selected a mobile phone or smartphone as their device of choice, and 25% said they spend more than five hours on their mobile phones every day. These employees are not only accustomed to digital communications, they expect it. Emails, text messages and push notifications can be used to reach younger hires to help them better understand and use their benefits. A communications campaign that involves videos, podcasts and social posts would also be engaging to Gen Z employees.

#2: Employees who are nearing retirement

Employees who are close to or considering retiring are at a unique time in their lives as well as their careers. While there is tremendous excitement about what lies ahead, there could also be a great deal of uncertainty as to how prepared they are financially. For employers, focusing on the needs of these employees at this stage of their career is just as important as doing so at any other stage of their professional journey.

• Encourage employees to consider catch-up contributions. Let’s face it, as people age, they’re more likely to have additional medical needs and higher medical costs. Making catch-up contributions to an HSA is a great way for employees age 55 or older to set aside even more money to pay for medical expenses now or in retirement. Employees age 55 or older can make an additional $1,000 catch-up contribution over the IRS annual limits, which are $3,850 for a single person and $7,750 for families in 2023.
• Tell employees they must take action before they are enrolled in Medicare. Medicare enrollees are no longer eligible to contribute to an HSA, and employees who continue to contribute to an HSA when they’re not eligible face tax and financial penalties. To reduce the risk of these penalties, the Centers for Medicare & Medicaid Services and the IRS suggest employees stop contributing to their HSAs before they turn age 65 or more than six months before they enroll in Medicare if they are delaying Medicare enrollment until after age 65.
• Reinforce the ways they can use their HSA balance. The money in employees’ HSAs is theirs to keep. These funds can be used tax-free for eligible medical expenses, which now can include Medicare premiums and out-of-pocket costs, as well as certain other health expenses. However, once people reach age 65, HSAs allow money to be withdrawn for non-health care expenses as well, without a penalty, but those expenses will be subject to income tax.

Related: The HSA: A retirement benefit in disguise?

 It’s important to communicate the benefits of an HSA to employees, but this shouldn’t be a one-size-fits-all strategy. While first-time hires may not fully understand the concepts of HSAs and saving for retirement, it’s important for them to consider the importance of developing good savings strategies early in their career. For those nearing retirement, a completely different set of concerns means talking about how they can use their funds, which are theirs to keep, and what rules go into effect when they become eligible for Medicare.

As an employer of a diverse workforce, you play a crucial role in getting all hires off to a good start and helping them to develop solid financial habits that will serve them throughout their entire careers, up to and including retirement.

Sara Taylor is Senior Director, Employee Spending Accounts, at WTW.