Benefit spending accounts are powerful tools that help individuals cover and save on the cost of healthcare-related expenses.
Recent research from Devenir‡ found that more Americans are using benefit spending accounts than ever before. According to the survey, there were about 32 million healthcare savings accounts (HSAs) by the end of 2021, an 8% increase over the previous year. As these accounts, and how they’re utilized, continue to evolve, here are three trends that have emerged in 2022.
Lifestyle spending accounts are gaining popularity
Lifestyle spending accounts have been around for years but haven’t yet been as widely adopted as HSAs. However, with the shift in post-pandemic employee culture, more employers are offering lifestyle spending accounts as a way to recruit new talent and retain employees. In fact, a MetLife‡ employee benefits trend study found that 69% of workers indicate that having a wider array of benefits would increase their loyalty to their employers.
Unlike HSAs, lifestyle spending accounts are entirely funded by the employer, the funds are considered taxable income and the accounts are completely customizable. The accounts can be used to cover the cost of a variety of expenses including gym memberships, fitness trackers, financial planning, retreats, professional development and more. Employers set the parameters of what expenses are considered eligible for the employees as well as the budget provided and the cadence of funds.
Not only could a lifestyle spending account increase retention, but employees who use the account will have resources to support financial and physical wellness.
Continued push for expansion of HSA and FSA coverage
Employers Council on Flexible Compensation‡ (ECFC) is a nonprofit organization dedicated to the advocacy, education, advancement and innovation of tax-advantaged benefit programs that facilitate choice for employers and their employees. At the 2022 ECFC annual conference in Washington D.C., members of the group met with congressional members, staffers and more to discuss the expansion of HSAs and flexible savings accounts (FSAs).
There are several groups including veterans, individuals on Medicaid or tribal health plans that have limited access or don’t have any access to these accounts. For example, veterans who receive medical benefits from Veterans Affairs (VA) aren’t eligible for an HSA account.
While HSAs and FSAs offer a variety of benefits including saving on taxes, saving on medical expenses and more, Congress is gridlocked and divided on many topics with healthcare issues being one of them. Groups like ECFC continue to advocate for the expansion of these accounts to ensure all American’s have equal opportunity to utilize the benefits.
Increased investing in HSAs
Devenir’s‡ annual HSA research found that there was $34.4 billion estimated in HSA investment assets as of December 31, 2021, a 45% year-over-year increase. Additionally, more than 2 million HSAs have at least a portion of their HSA dollars invested, representing more than 7% of all accounts. HSAs are a great tool to save for retirement through investing.
Not only are contributions tax-deductible, any interest or dividend you earn aren’t taxable.1 Additionally, there’s no requirement to withdraw funds at a certain age, so while you can’t contribute when you enroll in Medicare, your funds can continue to grow.
As benefit spending accounts continue to advance, it’s important to understand how they can be expanded and used to better serve accountholders.
Learn more about UMB Healthcare Services, which ranks fifth in total accounts and seventh in total deposit assets among all HSA providers (Source: 2021 Devenir Mid-year HSA Market Statistics & Trends Report‡).