“The greatest exposure in retirement spending is health care. It doesn’t have price elasticity like other benefits.”
So began a panel discussion of experts on the technical aspects of heath savings accounts, as well as how to effectively incorporate them into an advisor’s business, to close Fi360’s annual conference in Nashville on Tuesday.
Moderated by David Snyder, CEO of Perspective Partners, it featured Wagner Law Group’s Marcia Wagner, Jamie Greenleaf of Cafaro Greenleaf, Sherry Fitts with Sheridan Road and Brad Arends with Intellicents.
HSA information for employers is not widely available or understood, Snyder said, and it’s therefore up to the advisor “to fill that gap.”
“It also allows an advisor to bring up another conversation with the C-suite over a major concern they all have—health care. The 401k industry is experiencing headwinds with more retirement assets leaving 401ks than entering. HSAs, on the other hand, have pretty big tailwinds, and assets are being added.”
Wagner went so far as to claim there is little or no downside to expanding into the HSA market, but advisors and participants must be aware of contribution limits.
“If you aggregate all of the catch-up [provisions], they can total almost $32,000, so it’s significant for family,” she explained. “Tax reform is coming, and Washington is talking about 401ks and a reduction in elective deferrals, so it will be hard to protect 401k benefits in the tax reform era. With HSAs, they’re talking about increasing the amount investors can contribute, and so there will be some sort of parity and equilibrium between the two.”
Greenleaf described HSAs as “401ks for health care.”
“They allow us to offer a more holistic approach to investing and benefits,” she said. “We ask employers to allow us into the conversation over health care benefits. But there are three major challenges when entering the marketplace: the first is getting the employer to understand the product, the second is the territorial issues with the employer’s health care provider, and the third is the education and communication with the employee. If you think employees have trouble understanding 401ks, it’s far worse with HSAs.”
Arends claimed the silos between health care and retirement savings are collapsing; not by choice, but necessity. He also warned attendees to “be aware that you will get health insurance questions when discussing HSAs with clients. It’s only natural and how they assess and allocate risk and resources. If you have a health benefit broker with you it will make it easier, but somebody on your staff should be able to answer those questions.”
Fitts leaned heavily on the tie-in with financial wellness, a current area of industry focus of which her firm, Sheridan Road, has a strong interest.
“Sheridan Road has these five-year plans, and the latest involves growing geographically. But they are also very bullish on financial wellness, which is intersection of health and wealth. It really comes down to human capital management, a term MassMutual’s Hugh O’Toole uses, and that intersectionality is critical. But it’s also an area advisors aren’t currently occupying. So I see HSAs as an offensive play for the advisor’s business.”
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.