How Do 401k Plan Sponsors Feel About HSAs?

The average account balance is $3,161

401k, HSA, retirement, employersExpect to see more HSA innovation.

HSAs continue their climb. Employers favor health savings accounts over flex spending and think they should be open to all employees, not just those in high-deductible plans.

These are some of the findings of a new Plan Sponsor Council of America survey, designed to measure plan sponsors use of HSAs and “their perceptions of it as a retirement savings vehicle.”

Benefits of the HSA

The majority (75.3 percent) of employers view the HSA as part of their retirement benefits strategy.

Indeed, nearly 60 percent of the respondents believe they should replace Flexible Spending Accounts, and, as mentioned, nearly three-fourths of employers think that HSAs should be open to all employees.

Eligibility and Participation

Based on the employer responses, about 80 percent of employees are eligible to participate in the one when offered by the employer. The average account balance was $3,161.

In a bit of fun with math, the council reports that a little more than 40 percent of respondents indicate that 25 percent or fewer of their participants use up the entire HSA balance every year. An additional 35 percent of plans say that between 26 and 50 percent of their participants use their entire balance every year.

What’s it mean?

Many employers feel it’s a vehicle for employees to accumulate savings.

Plan Design Features

More than 80 percent of the employers reported contributing to the HSA, where two-thirds provide a set dollar amount based on the HDHP coverage tier.

Many plans (40 percent) front-load contributions at the start of the year while 30 percent contribute each payday. More than half of the respondents reported covering the cost of maintenance fees for active employees and 6 percent pay them for terminated employees.

Only 21 percent of surveyed employers are concerned about the fiduciary liability of sponsoring a HSA-HDHP.

HSAs were a creation of the Medicare Modernization Act of 2003 and subsequent legislation contributed mightily to HSA growth. In 10 years, from 2006 to 2015, assets grew from approximately $1.7 Billion to approximately $30.2 Billion.

“Absent legislative action that would curtail tax preferences, HSA accounts are here to stay,” PSCA Executive Director Tony Verheyen said in a statement. “As HSAs continue to grow, look for PSCA to conduct additional benchmarking surveys to track trends and highlight HSA innovations.”

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