Confusion About HSAs Remains Default Employee Position

A new survey shows many Americans are flatly unaware that they can use their health savings account assets accumulated in their working years to pay for health care and long-term care expenses in retirement—believing erroneously the money must be spent or be forfeited each year.

A new joint report by the LIMRA Secure Retirement Institute and Insured Retirement Institute (IRI) finds only 51% of Americans believe they are knowledgeable about health savings accounts (HSAs).

And as is often the case in life, it seems that those people who feel confident in their knowledge on the subject actually have some trouble demonstrating their supposed prowess. As LIMRA SRI and IRI explain, the study surveyed consumers, financial advisers, asset managers, and employers to get a complete understanding of the HSA market and how this product is being used.

“The survey results indicate there is much to be done to educate consumers, advisers and employers to ensure the full benefits of HSAs are realized,” researchers warn.

The survey shows many Americans are flatly unaware that they can use their HSA assets accumulated in their working years to pay for health care and long-term care expenses in retirement.

“In fact, two in five Americans mistakenly believe that balances must be spent by the end of the year, or be forfeited,” researchers warn. “The growing costs of health care and long-term care have prompted many advisers to address these risks with their clients as they plan for retirement. Nine in 10 advisers surveyed say they typically discuss healthcare or long-term care with clients, but only seven in 10 have specifically addressed the use of an HSA.”

Importantly, LIMRA SRI and IRI find those who do not discuss HSAs acknowledge they have insufficient expertise with HSAs. Nearly all advisers and employers surveyed say they would like to learn more.

“Today, only a quarter of Americans plan to use HSA assets to fund future health care costs in retirement,” says Judy Zaiken, corporate vice president and project director at the LIMRA Secure Retirement Institute. “The findings underscore a great opportunity for the industry to educate consumers and advisers on the value of using HSAs for tax-free asset growth and as a financial hedge against retirement health care costs, which is still an uncommon strategy.”

IRI President and CEO Cathy Weatherford adds that her organization “values the opportunity to collaborate with LIMRA Secure Retirement Institute to examine this growing aspect of holistic retirement planning.”

“As the onus of providing income during retirement is increasingly the responsibility of the individual, it is critical for the retirement income industry to drive consumer education on the value of participating in an HSA,” she argues. “While the need for more education is clear, it is encouraging to see the continued growth of HSAs over the past decade and the increasing number of employers offering and seeking avenues to offer these accounts in their benefit packages.”

As the researchers explain, the study found there were some groups of consumers that are more likely to be knowledgeable about HSAs than others. Wealthier households especially are more likely to be knowledgeable about HSAs. Among households with $100,000 or more in financial assets, 65% are knowledgeable, as compared to just 40% of those with less wealth.

Men are somewhat more likely than women to report being knowledgeable about HSAs (58% percent of men versus 48% of women are somewhat or very familiar). Similarly, married workers report more HSA knowledge than do non-married workers (69% versus 52%). Consumers with children report more HSA knowledge than those without children (55% versus 44%).

More LIMRA SRI information and research is available here.