Editor’s Note: This is the latest in a series of posts by speakers at the 2013 NAPA/ASPPA Summit, March 3-5, 2013 in Las Vegas. Doug Fisher of Fidelity Investments — who will team up with EBRI’s Nevin Adams to present the General Session at 8:15 on Tuesday, March 5 — describes Fidelity’s effort to gauge how employees divvy up pre-tax deferrals between HSAs for future health care expenses and 401(k)s for retirement saving.
Will HSAs eat away at your employees’ abilities to save for retirement?
Even with the passage of the Affordable Care Act, employers continue to struggle with managing the cost of health care and finding new ways to share with employees the cost of providing coverage. In 2003, Congress created health savings accounts so that individuals who were covered by high-deductible health plans could receive tax-preferred treatment of money saved for medical expenses. The usage of HSAs continues to grow.
At Fidelity, where we manage both employer-sponsored 401(k) plans and HSAs, we wondered about the effect investing in a HSA would have on contributing to a 401(k). If an employee only has a certain amount of money to defer on a pre-tax basis, does investing in an HSA naturally decrease the amount contributed to a 401(k)? And if so, by how much?
Enter Fidelity’s big data. We examined nearly 81,000 Fidelity record-kept HSAs and record-kept data on nearly 20,000 corporate DC plans with approximately 11 million participants (as of Dec. 31, 2011), and came up with some surprising results:
• The average DC deferral rate for employees who also contributed to an HSA was 8.5% versus 8.1% for the average Fidelity retirement participant.
• Similarly, HSA holders of all ages and incomes have significantly higher average DC account balances than the average DC participant at the same age and income. In some cases, they have accumulated an additional $100,000 in their 401(k)s.
In addition to uncovering benefit trends, Fidelity’s “big data” helps plan sponsors craft benefit plans that will drive better outcomes for its participants.
See you in Las Vegas, where we’ll discuss other ways in which Fidelity’s big data plays a leadership role in the retirement and health care industry, and in designing the benefit plans of the future.
