Firm unveils integrated ‘health and wealth’ experience to simplify and clarify savings priorities
New paper lays out strategy for maximizing retirement and health savings accounts
Empower Retirement, the nation’s second largest retirement services provider,1 has made it easier for employees to see how their health savings accounts (HSA) can prepare them for retirement.
Empower has deployed a new approach that expands its interactive technology to allow plan sponsors and participants to see in a glance what their projected healthcare costs may be in retirement and how it compares with the projected balances in their HSA.
“Employees are discovering the power of using HSAs as a vehicle for savings. These accounts have grown exponentially over the past several years and we are seeing balances building,” said Edmund F. Murphy III, President of Empower. “Having dollars set aside in this way provides the opportunity for many Americans to effectively manage what is likely to be one of the largest expenses in retirement.”
The improved and streamlined Empower experience offers:
- A holistic view of a participant’s retirement readiness, using a numeric estimation of the percentage of working income an individual is on track to replace in retirement and based on numerous financial factors
- Technology that makes it easier for participants to adjust their deferral with a simple click and send those changes straight to payroll departments
- HSA utilization, blending data of prior year contributions and annual estimates
- Payroll integration, which simplifies administration for sponsors
This interactive technology allows employees to think about retirement in categories and visualize which part of their savings will be allocated to which expense category. HSAs can make a substantial difference in savers’ ability to fund their expenses in retirement.
Murphy explained that the updated interface is designed to minimize the administrative burden on the part of employers.
The interactive technology builds on Empower’s innovative HSA, the Empower Health Savings Account, which launched in March 2017. The Empower Health Savings Account provides plan participants access to an online solution that integrates retirement and healthcare savings, helping participants identify the gaps in their retirement plan and develop a strategy to take action.
A 2017 survey2 of 2,000 U.S. consumers, 21 years and older, who are employed and participating in their employer’s defined contribution retirement plan, shows that while HSAs garner strong interest by respondents, many are confused by how they should be used. About half of respondents are familiar with HSAs, but only 30 percent could identify features correctly. Among HSA benefits, the tax advantages of these accounts drew the least level of awareness with only 22 percent responding that they understood these features.
The survey results also showed that respondents who use an HSA are more confident than others in their ability to cover healthcare expenses in retirement by a margin of 9 percent (43 vs. 34 percent).
New paper clarifies how to optimize the use of an HSA
The Empower Retirement-developed savings optimization model is laid out in a white paper, “The New Rx for Retirement,” which can be found at Empower Institute. It goes beyond calculating projected healthcare costs by showing employees how much it will take to cover those costs and what the savings accounts will look like in the future if they make changes to their monthly contributions.
“It’s all about providing insights on what employees need to save,” said Kenneth M. Forsythe, Empower Retirement Head of Product Strategy. “Retirement has been viewed as one single overarching savings goal. It makes sense to view retirement in separate health and wealth categories and incorporate savings strategies for each anticipated expense.”
“We want to help employees understand the best way to use their health savings accounts and to begin saving specifically for their healthcare expenses in retirement,” Forsythe said.
More information about saving for retirement healthcare expenses and the Empower HSA can be discovered on the company website.
About HSAs: An HSA is a medical savings account available to taxpayers who are enrolled in a high-deductible health plan. When used for qualified medical expenses, the funds within an account are not subject to federal income tax. HSA funds roll over and accumulate year to year and are owned by the participant. Unlike a flexible savings account that’s used for spend-as-you-go expenses, an HSA is designed to help workers save additional funds for healthcare needs in retirement.
About Empower Institute
Utilizing resources from within Empower Retirement and the academic and policymaking communities, Empower Institute critically examines investment theories, retirement strategies and assumptions, and suggests changes that can achieve better outcomes for companies, institutions, retirement plan sponsors, investment advisors and individual investors. Research from Empower Institute is available at www.empower-institute.org.
Headquartered in metro Denver, Empower Retirement administers $545 billion in assets for more than 8.5 million participants, as of June 30, 2018. It is the nation’s second-largest retirement plan record keeper by total participants (Pensions & Investments, April 2018). Empower serves all segments of the employer-sponsored retirement plan market: government 457 plans, small, midsize, and large corporate 401(k) clients, non-profit 403(b) entities, private-label recordkeeping clients and Individual Retirement Account customers. For more information, please visit www.Empower-retirement.com.
Stephen Gawlik — 303-737-0899 (office), 617-417-4408 (cell)
Monica Mendoza — 303.737.2626 (office), 719-373-2460 (cell)
To learn more about how we’re empowering plan sponsors and their participants to be more engaged in their retirement plans than ever before, call us at 800-719-9914.