HSA balances are up, but contributions are down.
The Employee Benefit Research Institute released a study finding that between 2019 and 2020, Health Savings Account (HSA) balances modestly increased by $400.
However, average annual individual contributions fell 2%, and average annual distributions declined to an all-time low of $1,700.
Lower HSA contributions could be tied to employment concerns related to the COVID-19 pandemic; distribution declines could owe to fewer people seeking routine medical care during the pandemic.
Trends in Health Savings Account Balances, Contributions, Distributions, and Investments and the Impact of COVID-19 also concludes that while HSAs offer a valuable tax incentive to set aside money on a tax-favored basis for current or future medical expenses, account owners often appear to be using the accounts primarily to cover current expenses, instead of leveraging the tax preference by contributing the maximum or maintaining HSA balances for retirement health care expenses.
In addition, account holders’ use of investments other than cash within HSAs remains low, at nine percent.
This Issue Brief is the fifth in a series of longitudinal studies from EBRI’s HSA Database, examining trends in account balances, individual and employer contributions, distributions, invested assets, and account-owner demographics from 2011‒2020.
Such analysis can help plan sponsors, providers and policymakers better understand strategies that can help improve employee financial wellness. The HSA Database contains 11.4 million accounts with total assets of $32.9 billion as of Dec. 31, 2020.
“As individuals become more familiar with HSAs, they are using the accounts more as designed,” Paul Fronstin, EBRI Director of Health Research and Education, said in a statement. “Account balances are growing over time, enabling longtime accountholders to withdraw larger sums when unexpected major health expenses occur. Plan sponsors that value employee financial wellness can work with administrators and advisors to better educate employees on the use of HSAs, including available investments.”
THE FULL REPORT CAN BE DOWNLOADED HERE
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.
