What Younger Generations Potentially Miss With HSAs and How Employers can Help

Matt Farrar of Voya explains how plan sponsors can work with participants to take advantage of an employer-provided HSA
HSA
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Many American workers today may not be saving adequately for retirement, in part because of rising healthcare costs as well as healthcare needs that generally increase as people age. In response, many companies have introduced health savings accounts (HSAs) within their benefits offerings, which are uniquely designed to help pay for eligible short-term healthcare expenses and can also be considered to help close the longer-term retirement healthcare savings gap.

Younger generations, however, might be missing opportunities to benefit from HSAs. Recent research from Voya Financial has found only 6% of working Americans ages 18 to 34 correctly identified the full benefits of an HSA1 — including important characteristics such as tax advantages, investment options, opportunities for healthcare (and living) expenses in retirement, as well as the option to roll over funds from year to year. While offering an HSA option to one’s workforce is important, educating younger generations just entering the workforce on the values of an HSA is especially critical.

The gap of HSAs for younger generations

Industry research shows that, by the end of 2023, there were $123 billion in HSA assets, a year-over-year increase of 19%.2 While it’s clear many may be enrolling in HSAs, younger generations may not fully understand their value as when it comes to health plan enrollment, the focus for younger workers is often centered around the cost of monthly premiums and deductibles for health plans. For example, when it comes to benefits enrollment, according to Voya’s data, 66% of working Americans ages 18 to 34 chose a plan with the “lowest monthly cost” compared to 41% of those 55 or older. In addition, 61% of those ages 18 to 34 chose a plan with the “lowest deductible,” compared to 47% of those 55 or older.3 This can indicate a gap in awareness of their value and a need for further education — especially among younger generations that are new to the workforce and may not simply understand the value of an HSA.

The good news is the interest in saving is apparent as Voya data has found that Gen Z (60%) and Millennials (53%) were significantly more likely to contribute more to health savings and spending accounts heading into 2024 compared to their Gen X (35%) and Baby Boomer (21%) peer groups.4 With this in mind, it’s clear to see the employee need is there, especially among younger generations.

As the younger workforce looks for ways to save, it is critical to ensure they have a clear understanding of how HSAs work and their opportunities to help meet short-term and long-term health savings needs.

How employers can provide support

The financial impacts from inflation and COVID-19 have significantly affected younger generations’ ability to save and financially support themselves. As a result, only 45% of young adults, ages 18 to 34, say they’re completely financially independent from their parents, according to a report by the Pew Research Center

Despite these challenges, younger workers still have an interest in saving and are seeking support from their employers. To help close the retirement savings gap, additional research from Voya has found 72% of Gen Z find receiving guidance on how to optimize their retirement savings and workplace benefits “extremely important” or “important.”5

Actionable education and consistent communication on how to achieve positive outcomes are important to help solve this gap, and the use of digital tools is one way to provide support, as there’s increasing adoption of mobile applications, planning tools and guidance solutions.

The power of digital

When adding an HSA to your benefits offering, digital tools can provide an even greater opportunity to support your entire workforce, especially the needs of younger generations. According to additional research from Voya, among benefits-eligible and working 18- to 34-year-olds, a majority (82%) “strongly agree” or “agree” they are interested in a support and guidance tool that helps them understand how much money to put aside for retirement, emergency savings and healthcare expenses.5

As many individuals have competing financial priorities, digital guidance tools can help younger generations in the workforce make more informed decisions when it comes to their workplace benefits and savings needs. For employers, offering support that considers the unique workplace benefits and savings needs of their workforce can ultimately help optimize their dollars, support their overall savings, and provide better utilization of employee benefits. 

Final thoughts

Employees, especially the younger generation in the workforce, could benefit from understanding the value an HSA solution can offer them. Employers have a real opportunity to empower employees with comprehensive communication and education strategies to help overcome this HSA knowledge gap. Providing these tools and resources can help employees take control of their finances and make more informed decisions about their financial future. An HSA is a lifetime account, and if workers start maximizing its benefits at a younger age, it has even more time to potentially grow and help meet their everchanging needs.

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[1] Voya Financial Consumer Insights & Research survey conducted March 9-15, 2023, among 500 working Americans age 18+ who have both an employer-sponsored retirement plan and a medical or health plan, featuring 188 health savings account owners.

[2] 2023 Year-End Devenir HSA Research Report.

[3] Voya Financial Consumer Insights & Research survey conducted Aug. 9-13, 2023, among 501 working Americans aged 18+ who have both an employer-sponsored retirement plan and a medical/health plan.

[4] Voya Financial Consumer Insights & Research survey conducted Oct. 2-3, 2023, among 1,005 adults aged 18+ in the U.S., featuring 467 Americans working full-time or part-time.

[5] Voya Financial Consumer Insights & Research survey conducted Jan. 22-23, 2024, among 1,005 adults aged 18+ in the U.S., featuring 455 Americans working full-time or part-time (313 who are benefits eligible).

This highlights some of the benefits of a Health Savings Account. If there is a discrepancy between this material and the plan documents, the plan documents will govern.  Subject to any applicable agreements, Voya and its subcontractors reserve the right to amend or modify the services at any time.

Matt Farrar

Matt Farrar currently serves as the product and sales lead for Voya’s Health Account Solutions product suite (HSA, FSA, HRA, Commuter, COBRA, and Direct Billing). He helps lead Voya’s go-to market strategy on these offerings for Voya’s Workplace Solutions teams.

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