More and more companies are offering high-deductible health plans paired with health savings accounts (HSAs) as a way to give their employees more options when it comes to their healthcare. An HSA can help people better manage health care costs but getting the most out of the account can be tricky. Here are some ways that employers can better educate their workforce about the benefits of opening an HSA and its uses.
Start with the basics: The advantages of an HSA
HSAs are one of the best long-term savings options out there. Since HSA contributions belong to the individual accountholder, the money can roll over year-to-year. Once there’s a certain amount in the account, accountholders are then able to invest the money and build up savings over time similar to other retirement accounts. Whether a person is able to contribute a little or a lot, HSAs give consumers a great option to save for their health care expenses. HSAs benefit the employee in a number of ways:
- Ownership: The money stays with the employee regardless of the employer
- Triple tax advantage1: Tax-free deposits, earnings and withdrawals
- Save for the future: After age 65, HSA dollars can also be used for non-health care expenses without penalty – participates just have to pay the tax. Accountholders age 55 or older can also make annual $1,000 ‘catch-up contributions.’
How to encourage employees to maximize their contributions
Employer contributions can be key to encouraging HSA adoption among employees. According to the 2019 year-end Devenir2 research, employers play a big part in driving account growth, accounting for 31% of all HSA dollars contributed to an employee’s account.
The average employer contribution was $648 with the average employee contribution of $1,121, for a combined annual total of $1,769. In accounts not associated with an employer, the average contribution was $1,546.
A seed contribution and/or ongoing matching support for employee savings can go a long way toward increasing balances.
Education is critical to employees taking full advantage
HSAs are still relatively new, 56% of accounts have been opened in the last three years alone. It’s important that employers are providing their employees with up to date information about HSAs and how to best use the account. Employers health plans are the largest driver of new accounts, accounting for 42% of new accounts opened during the first half of 2019 and HSA contribution continues to rise, topping $38 billion in 2019, up 14% from last year.2
UMB’s segmentation data, which looks at over a million active customers, shows that most accountholders are savers and hold funds in their account to use later in life. It also shows most UMB HSA accountholders are between 25-54 years of age and contribute just under $100 on average per month to their account. On average, the longer accountholders have experience with HSAs, the more they are used as investment vehicles rather than as a specialized checking account to cover current medical expenses.
By taking the time to educate employees about their HSA, employers are helping to ensure employees get the most out of their accounts and feel satisfied with their benefit offerings.
UMB Healthcare Services encourages partners to empower employees by using healthcare tools and resources to help employees become smarter healthcare consumers. Learn more about UMB Healthcare Services, which ranks fifth in total accounts and total deposit assets among all HSA providers (Source: 2019 ‡Devenir Year-end HSA Market Statistics & Trends Report‡).
1All mention of taxes is made in reference to federal tax law. States can choose to follow the federal tax-treatment guidelines for HSAs or establish their own; some states tax HSA contributions. Please check with each state’s tax laws to determine the tax treatment of HSA contributions or consult your tax adviser. Neither UMB Bank n.a., nor its parent, subsidiaries, or affiliates are engaged in rendering tax or legal advice. Withdrawals for non-qualified expenses are subject to income taxes and a possible additional 20% penalty, if you’re under age 65.
Investments in securities through an HSA investment account are:
Not FDIC-Insured · May Lose Value · No Bank Guarantee