Employers are widely familiar—at least at a high level—with high-deductible health plans (HDHPs) and health savings accounts (HSAs). Many include them as part of their employee benefits offering, but there remains a significant opportunity to maximize the value of HSAs as part of an integrated benefits package. The importance of HSAs has grown significantly not only as a way for employees to save for today’s health expenses, but also as an integral part of a retirement saving plan.
Being in the know: Benchmarking HSAs
Empower Retirement sponsored the 2021 Plan Sponsor Council of America (PSCA) Health Savings Accounts Survey to help employers gain a deeper and more balanced perspective of the HSA marketplace. The survey can be used as a comprehensive benchmark of the health savings market through its detailed data about HSA eligibility and participation, employer and employee contributions, investments, education, and overall program administration.
It’s important for employers and employees to have a full understanding of these savings vehicles due to their tax advantages — specifically triple tax savings1 — and many other benefits. Expanded and more targeted education is needed, but having a strong perspective about how their peers are approaching health savings accounts can help employers make more informed decisions.
The PSCA HSA Survey, now in its third year, highlights many positive trends in the development of the HSA market. There is much to be positive and optimistic about: Average contributions are on the rise, a large percentage of employers are making HSAs available and many are also making employer contributions. Total HSA assets are also on the rise thanks to growing contributions and rising investment markets.
- Average contribution rates up year over year: $2,958 (2020) vs. $2,595 (2019).
- Account balances rising: Average 2020 account balance was $6,318 up from $5,627 in 2019.
- Most employers and employers are contributing: 83.2% of employers (of those offering HSAs) make contributions to HSAs while 81.4% of employees with an HSA contribute.
- Majority of employers offer investment options: 84.4% offer investment options for HSA contributions beyond a cash equivalent or money market.
However, the survey results also confirm that some key areas remain a challenge and have hit a plateau. Education remains a perennial challenge for employers, and certain plan design features that could help accelerate employee participation are underutilized.
Room for improvement
- Few investing HSA balances: Just 20% of employees are investing their HSA contributions.
- Plan design gaps: Only 30% of employers are automatically enrolling employees with a qualifying HSA health plan.
- Retirement savings focus lacking: Fewer than 40% of employers say they position HSAs as a retirement savings vehicle.
- Need for HSA basics: Education remains the top issue according to 80% of employers.
Empower Institute research has also uncovered similar findings, especially when it comes to educational challenges and greater integration with retirement plans. HSA vs. FSA, a recently released Empower Institute white paper, examines these challenges and offers some recommendations to move forward and help improve employees’ financial well-being and retirement readiness:
- Take innovative approaches to help employees understand and use HSAs, especially when distinguishing from flexible spending accounts (FSAs) and communicating long-term retirement benefits.
- Frame HSAs as part of a retirement savings strategy rather than a savings account for current health expenses.
- Partner with a recordkeeper whose technology solution positions HSAs as a tool for retirement planning.
These three action steps help position HSAs as important contributors to retirement security rather than short-term spending accounts for health expenses. With benefits season around the corner, it’s important to not only help employees make the most of what’s available, but to consider how health plan and HSA offering changes could improve their financial well-being.
Download the 2021 PSCA Health Savings Accounts Survey