By Pension and Benefits Editorial Staff
More than half—51.5 percent—of companies position health savings accounts (HSAs) as a retirement savings vehicle, according to recent research from the Plan Sponsor Council of America (PSCA) and Empower Retirement. However, the survey found that employers remain concerned about how to best explain HSA benefits, as employee education topped the list of HSA concerns for the second year in a row. While the top education priority for nearly half of survey respondents is explaining the HSA tax preferences, 20 percent said that contribution limits as the primary goal.
PSCA noted that offering the same, or some of the same, investment options in the HSA program as in the 401(k) plan can help ease the education barrier around HSAs. However, only 4 percent of employers are currently doing so. Among the 15 percent that would like to, provider capability (or lack thereof) is the primary reason they are unable to at this time.
“Employers and employees are still learning about the advantages of using HSAs as a retirement savings vehicle,” said Tina Wilson, senior vice president and chief product officer at Empower Retirement. “As healthcare costs continue to rise, we want to help employees understand the best way to use these healthcare savings accounts and to begin saving specifically for their healthcare expenses in retirement. Our challenge is helping workers understand that HSAs can be part of a multi-pronged retirement plan.”
The survey found the following:
- The average participant contribution in 2019 was $2,595, the same as in 2018 while the average account balance at the end of 2019 was up slightly from a year ago, at $5,627.
- The majority of responding organizations (83.8 percent) offer investment options for HSA contributions, though more than 80 percent require a minimum balance of at least $1,000 to invest assets.
- Nearly a third of organizations automatically enroll employees in the HSA if they enroll in the HSA-qualifying health option but fewer than 10 percent of organizations use or suggest a default savings rate.
- While education occurs primarily at open enrollment for the vast majority of respondents, a growing number are doing so at other times throughout the year.
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