Why Employees Still View HSAs as Spending, Not Savings, Accounts

Health savings accounts (HSAs) are a high-value option with triple tax benefits that help employees prepare for health care costs in retirement, but many employees continue to miss out on the benefits, according to a new study.

Willis Towers Watson’s 2018 Health Accounts Employee Attitudes Survey found that two-thirds of respondents (65%) say they use their HSA money for current health care needs, while only 8% focus on saving their funds for the future. And because employees regularly use HSAs to pay for current health costs, fewer than half (45%) of the survey respondents have more than $5,000 saved.

At the same time, 82% see medical costs as their biggest challenge, yet only 25% rank contributing to an HSA as a top current financial priority, coming in behind saving for retirement in a 401(k) and paying off debt.


So what gives? It appears HSAs are still a largely misunderstood benefit. A large majority of employees (69%) who did not enroll in an HSA say they chose not to because they did not see the benefit, understand HSAs or take the time to understand them.

“From the data, it appears most employees are missing out on many HSA benefits, including the triple tax advantage, which can be invested to grow throughout their careers,” notes David Speier, managing director of Benefits Accounts with Willis Towers Watson. “In reality, many employees view HSAs as a tool for paying their immediate health expenses rather than a retirement savings vehicle.”

Not surprisingly, employees early in their career cite tight finances. Nearly a quarter of respondents who did not enroll in an HSA say they currently don’t have enough money to contribute to one, while nearly two-thirds of those who did enroll (63%) say they put aside what they can afford each month.

Still, even “financially adept” employees say they have trouble deciding where to save and how to spend. Only 22% of these employees first maximize their 401(k) contributions up to their company’s match before contributing to their HSA, which, as the authors note, is a common strategy recommended by financial experts.

Moreover, only one in four employees reportedly contribute to their HSA before their 401(k) plan when they do not have a matching employer contribution, which, as Willis Towers Watson notes, is also a recommended strategy. In addition, the firm notes that those who opt for medical FSAs often “leave money on the table or scramble to spend the funding before year-end.”

Help Wanted

Willis Towers Watson suggests that because of existing confusion among employees on how best to invest in their health accounts, a significant opportunity exists for employers and advisors to drive engagement and improve employee understanding of the benefits of an HSA.

Approximately 40% of respondents review their HSA account information monthly, and one-third review it quarterly. In addition, 44% of respondents say they value quality customer service as the most important feature of an account provider, while online tools and mobile apps were ranked second at 22%.

The authors further suggest that employers can help employees make good “save versus spend” decisions by integrating platforms with financial well-being programs.

“Since employees visit their HSA portal frequently to view and manage their health savings accounts, employers can capitalize on this opportunity to catch their attention by offering tools on the portal — such as retirement savings calculators and health care price transparency services — to help them understand and weigh the benefits between saving, spending or investing the funds in their account,” notes Speier. His recommendation is consistent with a recent HealthView Services study emphasizing the importance of including health conditions in retirement planning.

But even as the potential opportunities and plan sponsors’ interest in HSAs expand, certain obstacles remain in advising clients about utilizing them, according to a recent survey of plan advisors. One of the biggest challenges cited by advisors was that HSAs are linked to health plans, followed by difficulties in finding trusted HSA administrator partners for their clients.

The Willis Towers Watson survey conducted during the months of March and April 2018 measured the attitudes of over 2,155 full-time employees from private sector companies. Respondent demographics in age included Baby Boomer (25%), Generation X (39%) and Generation Y (36%).

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