Is it just us, or are health savings accounts suddenly everywhere?
Apparently the latter, and driven by greater awareness of the product due to financial wellness programs in the workplace.
Fidelity reports the number of employees who contribute to both a 401k and HSA increased 21 percent between 2014 and 2016.
“Employees saving in an HSA aren’t cutting back on contributions to their 401k, just the opposite: savings rates for employees with both a 401k and HSA are often higher (10.6 percent in 2016) than those saving in their 401k (8.2 percent in 2016),” the Boston-based investment behemoth said Friday. “In addition, 88 percent of HSA participants who started contributing to their HSA accounts maintained or increased their 401k savings after their HSA enrollment.”
The aforementioned financial wellness content has given employees “a better understanding of the tight relationship between saving for retirement and managing health care expenses.”
“Health savings accounts and 401ks contribute to an employee’s financial well-being, so it’s encouraging to see more employers and employees understand and embrace the complementary nature of these accounts,” Kevin Barry, president of workplace investing with Fidelity, said in a statement.
More and more employers are offering HSA-eligible health plans to their employees. These plans are also known as high deductible health plans (HDHPs) and are paired with health savings accounts (HSAs).
HSAs recently got a big boost from Congress, or more specifically the GOP’s health care bill. The bill doubles constitution limits, while allowing for both spouses to make catch-up contributions to one HSA beginning in 2018.
It also permits qualified medical expenses incurred before HSA-qualified coverage begins to be reimbursed from an HSA as long as the account is established within 60 days. Over-the-counter medications would also be covered by HSAs under the new plan, which were restricted under the Affordable Care Act.
Lastly, it lowers the tax penalty if the HSA is used to pay for unqualified medical expenses to 10 percent, from 20 percent. (As CNBC’s Tom Anderson notes, for those 65 or older, they can withdraw from an HSA penalty-free, but they do not get a tax break if the money is used for something other than health care.)
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.
