Advisors in the 401k space need to “own” the HSA conversation or risk playing second fiddle to employee benefits advisors.
Ryan Tiernan, National Accounts Manager at American Funds, told attendees at his Sunday afternoon breakout session during the Outcomes Conference 2019 in Denver that Health Savings Accounts (HSAs) usage will continue to grow as people learn about them because they are such a powerful way to invest for the long-term costs of health care.
In his session, “What Role Do Health Savings Accounts Play in Retirement Investing?” Tiernan notes that rising health care costs are critically affecting the way people save for retirement. To help participants save more for retirement, advisors need to know how to talk with clients (employers and employees) about how health care costs can affect retirement readiness.
As more advisors become fiduciaries, this understanding can help them provide even more value to clients while differentiating their practices.
Tiernan says HSA providers realize advisors are the next layer of growth for them, and they are taking steps to cater to the needs of advisors to help them expand the use of the “super tax advantaged” products.
Tiernan notes education is the biggest stumbling block to HSA utilization. As more people learn about what HSAs can do, more people will use them.
One logical place to start, Tiernan says, would be to rebrand “High-Deductible Health Plan” (HDHP) to “HSA-eligible” health care plan, because, as Tiernan points out, “who wants to be in a high-deductible anything?”
But you call it “HSA-eligible,” and it immediately seems more attractive. As the shift from traditional health care to consumer-driven health care continues, this is a good first step to introducing people to the most tax-advantaged tool out there.
He singled out many of the advantages of HSAs, including:
- This is an account that is getting employer contributions
- It is getting employee contributions
- It is “triple tax free”
- It is not “use it or lose it”
- It has investment capability
- No penalty after 65
- No RMDs in an HSA
- No impact to modified adjusted gross income
- It is a very efficient and robuts wealth management tool
In concluding the session, Tiernan offered these three tips on how to further integrate HSAs into your company:
- Assess the impact of taxation and contributions
- Host a joint health care consultant/DC advisor meeting
- Conduct an HSA vendor search
For more insights on HSAs and how to “own” the HSA conversation, visit https://www.americanfunds.com/advisor/insights/defined-contribution.html