Whether it’s an overall reflection of the rising popularity of the product, or a concerted company effort to attract more assets, Fidelity announced a steep rise in its health savings account business.
The Boston-based investment giant, which as the nation’s largest 401k recordkeeper acts as a measurement proxy for the overall industry, claims a 50 percent rise in HSA assets so far in 2018 when compared with last year.
Fidelity found one-in-four (25 percent) employees with access to an HSA are now using one of the triple tax-advantaged savings accounts.
When employers only offer an HSA-eligible health plan, nearly half of employees are electing to add the savings benefit.
However, Fidelity’s research also finds that despite growth in HSA openings, many individuals are not making the most of the benefits these accounts can offer, missing out on what it claims is the opportunity to grow health care savings for the long term.
“With more than half of Americans naming rising health care costs as a top financial concern, this increased adoption of HSAs shows an encouraging trend that more people are making health care savings a priority,” Eric Dowley, senior vice president, HSA Product Management, said in a statement.
However, he added that he still sees a need for more education around how people estimate and plan for potential health care costs—both in the short and long term—and how an HSA can be a valuable tool in addressing these expenses.
While the rise in HSA adoption signals more people proactively saving for health care, the topic still generates a range of questions and misconceptions, the company noted.
Even among account owners, many still are not fully aware of how HSAs work.
An HSA is a tax-advantaged offering available to individuals covered by an HSA-eligible health plan, also known as a high deductible health plan (HDHP). An HSA enables them to save pre-tax dollars for both current and future qualified health care expenses, including costs associated for dental, vision or out-of-network doctor visits, prescriptions and over-the-counter drugs and even Medicare premiums once eligible.
Account holders can use the account to pay for current expenses, and because the balance can carry over from year to year, it can also be a powerful tool to accumulate money and invest savings to pay for future expenses.
In addition, these accounts are praised for their triple tax benefits: 1) contributions to an HSA are tax-free, 2) balances can be invested and earnings grow tax-free, and 3) savings can be withdrawn tax-free for qualified medical costs.