Employees are failing to take advantage of health savings accounts and likely are missing out on medical and retirement savings opportunities, according to a recent survey.
In fact, nearly half (43%) of all employees enrolled in HSAs in 2017 did not contribute any of their own money to these tax-advantaged accounts, according to Willis Towers Watson’s 22nd annual Best Practices in Health Care Employer Survey.
With nearly three-quarters of employers (73%) offering their employees a high-deductible health plan tied to an HSA, the report emphasizes that this is a missed opportunity for many to reduce their out-of-pocket health care costs and potentially save for retirement.
“Whether an HSA is appropriate as a retirement savings vehicle should be evaluated on a case-by-case basis, taking into account the total picture of an employee’s income and plans for retirement,” says Trevis Parson, chief actuary, Health and Benefits North America, Willis Towers Watson. “However, if the situation allows it, employees should contribute to their HSAs to realize the tax advantage of funding more immediate qualified medical expenses, which would otherwise have to be paid with after tax income.”
But what steps can employers take to help encourage more employees to contribute their own money to an HSA? To encourage greater participation, the report notes that a majority (62%) of employers that offer HSAs are providing their employees with a head start by contributing seed money to the accounts.
In 2017, median seed amounts ranged from $300 to $750 for employee-only coverage and $700 to $1,400 for family coverage, depending on whether employers offered automatic seed money or automatic plus “earned” seed money, according to the findings.
Overall, the report recommends that employers:
- Communicate with employees early and often — and through multiple vehicles — to make sure employees understand the tax advantages and versatility of HSAs.
- Offer HSAs with automatic or earned money as further incentive for employees to enroll in high-deductible health plans and contribute their own money to their HSAs.
- Provide employees with decision support tools, including financial well-being tools to help employees estimate tax effects, current and future health care costs, and longevity needs to determine at what age they can achieve financial independence.
“Decision support tools that engage employees at the moment they are selecting and enrolling in benefit plans can be especially helpful in encouraging them to manage their assets wisely,” notes David Speier, managing director for Benefits Accounts, Willis Towers Watson.
Not surprisingly, the survey also found that HSAs coupled with high-deductible health plans are expected to continue growing in popularity among employers, with the percentage offering them increasing from 73% today to 83% by 2019.
The survey was completed by 698 U.S. employers between June and July 2017, with respondents collectively employing nearly 12 million employees operating in all major industry sectors. Results provided are based on 555 employers with at least 1,000 employees.
