While working adults may know what a health savings account (HSA) is, new findings show they might not completely understand them.
A new thought leadership paper from Voya reports that a prominent number of consumers are not fully optimizing usage of their HSAs. According to the report, “Amplifying the power of HSAs to boost health care savings—now and in retirement,” just 27% of respondents grasp that HSAs can be used as investment vehicles, and only 35% understand the primary reason for HSAs: to invest money for healthcare expenses throughout retirement.
Furthermore, 55% of working adults were aware that HSAs can be used to pay for healthcare expenses in retirement, and 54% know about the tool’s tax advantages.
“Many American consumers do not have a good grasp on how HSAs work and how the accounts can help them meet their long- or even short-term health savings needs.”
Voya Thought Leadership Council
“Research shows employees need additional education and decision support around HSAs,” Voya writes. “Many American consumers do not have a good grasp on how HSAs work and how the accounts can help them meet their long- or even short-term health savings needs.”
Still, despite the lack of understanding, Voya research shows that retirement plan participants want more accessibility to features that will grow their savings. According to Voya, 77% percent of respondents indicated that they were very or somewhat interested in services that help maximize benefit dollars across retirement savings, HSAs, health insurance, and voluntary benefits.
These participants are looking to their employer to offer such benefits, too. Findings show that employees want education and guidance on: how much to save for retirement (35%); investing in the retirement plan (34%); building emergency savings (31%); managing retirement healthcare costs (26%); understanding how health insurance works (23%); and knowing how much to contribute to an HSA (18%).
What employers can do
When developing HSA education strategies, Voya recommends employers use personalized messaging with their diverse workforces; be timely with communication approaches and include action steps for participants; focus on the tax benefits with HSAs; show how the benefit and retirement plan complement one another; position the HSA as a savings vehicle for unplanned medical expenses; provide HSA investing guidance; and offer decision support and planning tools.
What financial professionals can do
On the advisory side, Voya suggests financial professionals collaborate with employers by:
• Providing solutions that simplify administration for employers and decision-making for employees.
• Working with an HSA provider that offers a full range of services to support employees at all stages of their journey, including a broad menu of investment options, sweep functionality and online resources.
• Choosing an HSA provider that is not directly tied to the employer’s medical insurer to minimize potential disruption for employees if an insurer change is warranted down the line.
• Seeking the best value in administrative fees with the option of absorbing some or all of the expenses for employees who are actively funding their accounts.
• Assisting with HSA program design that seamlessly integrates into the employer’s full benefits package.
• Developing a year-round HSA employee communication and education strategy that helps employees understand how the retirement plan and HSA work together, how to optimize employer contributions and how to use the HSA to fund retirement health care budgets.
• Providing access to decision support tools that look at benefits decisions in a connected way—
both for open enrollment and throughout the year.
• Leveraging behavioral finance findings to help employees make more informed decisions.
Additional findings from Voya’s Thought Leadership Council can be found here.
SEE ALSO:
- HSA Assets on the Rise For Midyear 2023
- HSA Contribution Limits Get Biggest-Ever Boost for 2024
- Inflation Sparks Big Jump in 2023 HSA Contribution Limits
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.
