Health savings accounts continue to be one of the hottest topics in the retirement industry, but they are still largely misunderstood.
While most industry practitioners can speak to the benefits of HSAs, very few are equipped to have a discussion about actual solutions.
An afternoon session at the annual Excel 401(k): The Advisors’ Conference in Las Vegas on Tuesday covered a variety of solutions that have been implemented to date, as well as what to expect in the next evolution of HSA product design.
“History doesn’t repeat itself, but it often rhymes,” Kevin Murphy, senior vice president and head of strategic accounting with Franklin Templeton Investments, said by way of introduction.
The famous quote, attributed to author Mark Twain, was meant to compare how HSAs are perceived now with when 401ks were first introduced 30-plus years ago.
“There’s not a whole lot of money in them, contribution limits are low, and I have other things goings on,” Kevin Murphy, senior vice president and head of strategic accounting with Franklin Templeton Investments gave as examples of participant objections.
Noting lessons can be learned from 401k adoption and how attitudes changed as awareness grew, Murphy ran through a number of barriers that keep individuals from maximizing their retirement outcomes through the HSA:
Individuals don’t always appreciate the need to save. There are plenty of reasons, however. Premiums have skyrocketed well ahead of the cumulative growth of wages and inflation. In fact, since 1999 family health care premiums have increased 270 percent, a trend that we believe is likely to continue.
Individuals don’t always feel comfortable deciding how to invest their savings. And it’s a perfect opportunity for advisors.
Automation is key. Similar to a payroll deferral plan, an HSA can be set up to allow employees to make before-tax contributions.
“HSA investing is on the rise, but a lack of awareness and basic understanding is holding many participants back from putting their balances to work,” Murphy concluded.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
