Thanks to strong investment growth, health savings accounts grew to $92.9 billion in assets held in over 31 million accounts as of mid-2021, a year-over-year increase of 26% for assets and 6% for number of accounts.
This according to the recently released 2021 Midyear Devenir HSA Research Report, derived from a Devenir survey conducted in July to shed light on the rapidly growing and evolving health savings account (HSA) market.
The report found HSA investment asset growth was fueled by continued strong market gains. HSA investment assets soared to an estimated $30.4 billion at the end of June, up 73% year-over-year. On average, investment account holders held a $17,954 total balance (deposits and investments combined). That’s 6.6 times larger than an average funded non-investment holder’s account balance.
The report further found interest in HSA investing continues to grow. There are now almost 2 million accounts that are investing a portion of their HSA dollars, representing over 6% of all accounts. One-third (33%) of all HSA assets are in investments as of June 30th, 2021.
While the market fueled investment gains, employee contributions and withdrawals were generally flat. Account holders contributed almost $24 billion to their accounts in the first half of 2021 (up 1% from the year prior) and withdrew $16 billion from their accounts (down 1% from year prior).
Some notable findings regarding HSA contributions:
• 46% of accounts contributed more than they withdrew in first half of 2021.
• 31% of all HSA dollars contributed to an account came from an employer. The average employer contribution was $658 (for those making contributions).
• 55% of all HSA dollars contributed to an account came from an employee. The average employee contribution was $1,184 (for those making contributions).
• 11% of all HSA dollars contributed to an account came from an individual account not associated with an employer. The average individual contribution was $1,762 (for those making contributions).
HSA providers surveyed project HSA industry asset growth of 14% in 2021 (down from 16% at the end of 2020), while anticipating their own business will grow by 20% during the same period (down from 23% at the end of 2020).
Historically, the Devenir report said HSA providers have been fairly accurate with their growth forecasts, demonstrating an impressive understanding of the outlook for their book of business. However, in both 2020 and 2019 HSA providers significantly underestimated HSA market asset growth. Devenir currently projects that the HSA market will exceed 36 million accounts by the end of 2023, holding over $131 billion in assets.
The Employee Benefit Research Institute recently released a study showing HSA balances are up, but contributions are down. Between 2019 and 2020, the EBRI study showed HSA balances modestly increased by $400 while average annual individual contributions fell 2%, and average annual distributions declined to an all-time low of $1,700.
That study also concluded that while HSAs offer a valuable tax incentive to set aside money on a tax-favored basis for current or future medical expenses, account owners often appear to be using them primarily to cover current expenses and are not taking advantage of the tool’s tax benefits.
SEE ALSO:
• Health Savings Account Distributions / Contributions Declined in 2020