The Employee Benefit Research Institute (EBRI) released a report analyzing how over 12 million health savings accounts (HSAs) were utilized by employees, using data from 2021.
Despite a rebound in out-of-pocket health care spending in 2021, HSA balances grew on average over the course of the year, finds EBRI. Patients pursued health care services at a higher rate in 2021 compared to 2020, given the state at home orders at the onset of the COVID-19 pandemic. As a result, the average end-of-year balance was higher than the average beginning-of-year balance in 2021, at $2,645 relative to $3,902.
EBRI also reports that average balance increases were larger when analyzing accounts that had received a contribution (roughly 60% of accounts in 2021) at $2,640 during the start of 2021 compared to $4,352 at the end of the year.
Like how account balances increased by participant age, contributions tended to grow with age as well. Younger workers just starting their careers tended to have fewer discretionary dollars to divert to HSAs, resulting in lower contributions. The research found accountholders under the age of 25 contributed an average of $1,000.
Older accountholders were likelier to earn more and were therefore better positioned to contribute to their HSAs. The average contribution peaked at $3,258 for participants in the 55-64 age group.
As a result of these higher contributions and balances, accounts who received contributions from an employer tended to see different distribution behavior. Accountholders who received an employer contribution were more likely to have taken a distribution than accountholders who did not, at 69% versus 49%, according to EBRI. These accountholders also took larger distributions on average, at $2,009 compared to $1,677. For context, the average amount withdrawn from an account was $1,786 in 2021, according to the research.
EBRI explains its rationalization behind the difference in withdrawals between participants who received contributions versus those who did not, noting how accountholders likely justified a larger distribution given the extra cushion they received from employer contributions. Or, EBRI adds that it could be the result of the “endowment effect,” a phenomenon that causes accountholders who build accounts with their own contributions to avoid taking distributions.
A small majority of accountholders, at 0.5%, withdrew more than $10,000 from their account.
Similar to contributions, EBRI’s analysis found older accountholders were likelier to withdraw more from their accounts, compared to younger participants. Accountholders under age 25 who took distributions withdraw $738 on average, while their counterparts ages 55-64 withdrew an average of $2,152.
When it came to investing assets within HSAs, the EBRI research found only a small percentage of accountholder are taking advantage of this. Just 12% of HSA holders invested their HSAs in assets other than cash.
More findings on EBRI’s research can be found here.
SEE ALSO:
- Nearly Half of Private Workers Participate in DC Plans: EBRI
- The Good, The Bad, and The Ugly: All from EBRI’s 2022 Retirement Confidence Survey
- Key 401k Portability Finding in EBRI’s Retirement Confidence Survey
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
