RADAR READER: (How) have HSAs changed? Maybe not enough?
Last fall, the Plan Sponsor Council of America released its third annual HSA survey which identified some interesting trends in the development and deployment of health savings accounts. This week, we asked readers how they fit into their practice(s).
So we all know – and have probably touted – the “triple tax” benefits of health savings accounts, may have discussed strategies for maximizing their use alongside 401(k), and advised on opportunities for these health savings accounts. blunt what remains one of the top concerns of those retired or planning for retirement—health care costs.
That said, despite progress in other areas, employers’ primary concern with their HSA program remains…participant education. In fact, more than 80% of employers cited employee training as their top HSA concern. The top education priority for more than 60% of survey respondents was explaining HSA tax preferences, followed distantly by explaining contribution limits.
While about a quarter of this week’s respondents have worked with HSAs for more than 5 years – and 15% for 2-5 years – almost half (47%) do not work with HSAs (the rest for 1-5 years). 2 years) .
That said, when it comes to their plan sponsor clients, a clear majority offered these programs:
37% – Yes, most of them.
36% – Yes, some of them.
12% – Not sure.
6% – Yes, but only a few.
6% – No, none of them.
4% – Yes, all.
Ratios which, in fact, for 84% of respondents this week were about the same as before COVID. About 16%, however, said he picked it up.
“Large organizations were early adopters, the market is down as benefits brokers and fee compression look for better ways to deliver health insurance savings,” commented one reader. “I think plan sponsors are still struggling with pandemic issues and changing benefit plans is not a top priority,” said another.
We asked readers if, of the HSAs they work with, participants were allowed to invest in more than money market funds:
31% – Not sure.
29% – Yes, most of them.
27% – Yes.
12% – Only some of them.
2% – No.
And as for those where participants could invest beyond money market funds, we asked them if they had taken advantage of this option:
29% – Yes, but not very much.
20% – Yes, some of them.
16% – I don’t know.
12% – I do not work with HSAs.
10% – Yes, most of them.
10% – Not sure.
2% – Yes.
We received a number of comments on this this week. Here is a sample:
Thanks for bringing up this topic. Unfortunately, it seems that integrating HSA into the DC business portfolio is on the average advisor’s radar, but never reaches breakout speed. They are somewhat aware of the HSA, but general working knowledge is where it stops. Frustratingly, sponsors are clamoring for education but, with no real skin to the game at advisor level, this remains a tertiary discussion (at best). “What would it take for you to add HSA counseling to your DC/wealth practice?” could be a future question of this survey attempting to get to the real root of advisor apathy towards this most effective and efficient way to save/invest for the cost of health care today and in retirement.
My compliance department won’t let me work with HSAs. They say it’s a HIPAA issue.
I love HSAs, but our company doesn’t sell them.
The biggest decision isn’t HSA, it’s budgeting/understanding the difference between PPO and HDHP. Help people understand their annual budget and what the maximum net outlay is (taking into account monthly premiums). HSA is an added benefit if that choice makes sense to participants. HSA then becomes part of the funding plan from a participant’s paycheck based on suitability and affordability.
The industry needs to streamline a process for advisors to be paid on employer-sponsored HSA accounts, as they have with all other investment-based vehicles. I would work with the HSA for almost all of my clients, if I could get paid. At this point, I’m only doing employee training on HSAs for some of my biggest clients, because I’m not going to focus on one service and take fiduciary risk, if I can’t get paid something for it . HSA shouldn’t be a big profit center for me, but some compensation is needed for time and risk. Asset-based payment (bps) would make the most sense to me (a fee, not a commission), but vendors, RIAs, and B/Ds don’t seem to agree.
These are the first innings of how we can impact HSAs as a savings and investment tool versus a spending account. Lots of avenues here to cross-reference the financial benefits of wellness with the benefits of savings (401k, HSA, etc.).
We approach it only in an educational way, there is nothing for us, but it is important to demonstrate a breadth of knowledge in the benefit space.
Like 401(k)s, I think HSAs should also be able to declare a beneficiary, especially between spouses and ex-spouses. Provided the funds are used for approved medical expenses, they should be available for use by others.
Need higher limits and education around them. very confusing for employees around Medicare.
I think the limits on HSAs should increase. Retirement health care costs can be huge and it shows that no one pays much attention to them.
Not much interest. The HSA can get lost in the alphabet soup of FSA etc.
Increase the limits for sure.
HSAs should not be tied to HDHPs. We should eliminate FSAs and allow HSAs for any type of plan to reduce confusion and eliminate the mentality of using it or using it. Instead, contribution limits should be tied to the type of plan you have. HDHPs should simply be granted much larger HSA contribution limits than PPOs and HMOs. This would eliminate the alphabet soup of confusion, while retaining the overall value of HSAs. It would also eliminate unnecessary last-minute healthcare expenses in RTAs and allow those dollars to focus on necessary, unreimbursed healthcare expenses. And HSA matching contributions must be separate from the carry-forward limit.
There is still a need for a lot of employee education on HSA retirement benefits.
The basic experience is that very few employees, even if they accumulate funds in the HSA, invest the accumulated funds.
I call them the Rodney Dangerfield of the retirement savings plan – they get no respect as a retirement savings vehicle despite being tax and FICA exempt when contributing and non-taxable when the distribution of medical expenses also (and what retiree does not have medical insurance expenses?). Such a fantastic deal that is largely ignored, but changing!
Many employees are skeptical of HDHPs and HSAs, so the move is happening, but more so with younger or higher earning employees looking to defer more taxes.
Clients are interested in ways to help employees invest. They’re thinking of a “range of plans” but don’t want it to become subject to ERISA limiting investments
It would help if Congress dropped the Medicare rules prohibiting HSA dues or the 6-month rule. Most people do not know this and it creates many corrections.
Thank you to everyone who participated in this week’s NAPA-Net Reader Radar survey!