Employees Struggle With Allocating Money to HSAs and Retirement Plans

Even financially adept employees have trouble deciding where to save and how to spend.

Eighty-two percent of employees see medical costs as their biggest challenge now and in the future, according to the Willis Towers Watson 2018 Health Accounts Employee Attitudes Survey.

Yet only 25% rank contributing to a health savings account (HSA) as a top current financial priority, falling below saving for retirement in a 401(k), paying for essential day-to-day expenses and paying off debt. The survey found the majority of employees (69%) who didn’t enroll in an HSA said they chose not to because they didn’t see the benefit, understand HSAs or take the time to understand them.

While HSAs can be a high-value option to help employees prepare for health care costs in retirement, most employees use them primarily as spending accounts for immediate health expenses, Willis Towers Watson found. Two-thirds of survey respondents (65%) use their HSA money for current health care needs, large and small, while 8% focus on saving their funds for the future. Because employees regularly use HSAs to pay for current health costs, less than half (45%) have more than $5,000 saved.

Finding the money to contribute

Roughly one-quarter of employees who didn’t enroll in an HSA say they don’t have enough money to contribute to one at this time, while nearly two-thirds of employees who did enroll (63%) say they put aside what they can afford each month. Savings to an HSA may be limited by an employee’s financial position or may be a result of prioritizing contributions to other employer-sponsored benefits. Willis Towers Watson suggests portals integrated with financial planning tools can help employees make strategic decisions about where to best save their money based on their unique financial situation.

Even financially adept employees have trouble deciding where to save and how to spend. For example, only 22% of employees in this group first maximize their 401(k) contributions up to their company’s match before contributing to their HSA—a common strategy recommended by financial experts. Further, only one in four employees contribute to their HSA before their 401(k) plan when they don’t have a matching employer contribution, also a recommended strategy.

In addition, those who opt for medical flexible spending accounts (FSAs) often leave money on the table or scramble to spend the funding before year-end. Although 69% of FSA enrollees reviewed their previous health care expenses to determine their contribution, many employees are still losing money when opting into FSAs. Forty-eight percent said they could have put aside more money; 36% often spend frantically at year-end to use all of the money in their account; and 32% find it hard to spend all of the money in their account by year-end.

Employees value help with HSA decisions

Nearly half (44%) of employees surveyed said they value quality customer service as the most important feature of an account provider, while online tools and mobile apps were ranked second (22%). Willis Towers Watson says these responses suggest employers have a great opportunity to engage employees and enable them to make good “save versus spend” decisions by providing online tools that offer personalization and decision support on the HSA account portal.

They can also help employees better manage HSAs by offering delivery platforms that are integrated with financial wellbeing programs. For example, 61% of employees surveyed look for online tools or mobile apps to help them manage their health savings investment.