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Will HSAs Grow to Become Attractive to DCIOs?

Do HSAs offer an opportunity for DCIOs to manage more money in corporate benefits, as suggested recently by a Wall Street Journal article?

Though Devenir Research reported healthy gains in HSAs in 2015, increasing assets by 25% to over $30 billion and 16.7 million accounts, those assets still pale in comparison to the trillions currently in DC plans and IRAs. In addition, most HSAs are currently in safe investments like money market funds, either because of plan or size restrictions or because participants view their HSAs as spending accounts for paying immediate health care expenses, not savings accounts.

But that may change, driven by the popularity of high deductible health plans (HDHPs) as employers shift more responsibility for funding health care to participants, just as they did with retirement plans. Higher health care costs, as well as growing use of an employer match, will only make HSAs more popular.

Research by Benefitfocus, a cloud-based benefits manager, showed that a majority of companies on their platform offer HDHPs, and that they are most popular among Millennials, with 44% using them. But Benefitfocus also notes that not all of these people are taking advantage of HSAs or other voluntary benefits that supplement HDHPs, like critical illness, hospital indemnification and accident insurance.

The triple tax benefits of an HSA, along with the realization of how much will be needed to pay for health care expenses in retirement, will only increase the popularity of HSAs — a relatively untapped market for DCIOs.

Opinions expressed are those of the author, and do not necessarily reflect the views of NAPA or its members.

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