This open enrollment season, employees are not connecting the link between health savings accounts (HSAs) and long-term savings, according to a survey from Alegeus.
While most consumers Alegeus polled in its “2021 Pre-Open Enrollment Survey” are actively saving for retirement (53%) and many consider themselves savvy investors (45%), a majority do not see HSAs as a means for achieving either. Only 32% say they understand that HSAs can help with long-term expenses, and only 17% invest HSA funds for growth.
Alegeus says this presents areas where benefit administrators and employers can focus their education efforts. “I see a major opportunity here to put the ‘savings’ back in ‘health savings account,’” says Leif O’Leary, Alegeus CEO. “We’re happy to see that consumers understand the value of long-term savings and investing. That’s a critical first step. But now it’s up to us as health benefit experts to provide the education and resources to help consumers take advantage of their HSA in pursuit of their saving and investing goals.”
More than half (56%) of survey respondents report that they have contemplated health care costs specifically in their retirement planning. However, 83% of those surveyed who have an HSA don’t invest their funds for growth. Alegeus says this could be due not only to a lack of available funds (most HSAs set a minimum threshold of $1,000 to invest), but also to a lack of knowledge about how HSAs work. Only one-third of respondents say they are “very familiar” with HSAs.
In addition, the survey found, only 32% of respondents understand that HSAs are beneficial for both short- and long-term expenses. Only 42% say they know HSAs can be used for investing.
While plan sponsors can use the open enrollment period to educate employees about how HSAs work, Steve Neeleman, founder and vice chairman of HealthEquity in Draper, Utah, previously told PLANSPONSOR, “The best time to engage with employees and educate them about health savings accounts is after open enrollment.”
In addition, Lisa Margeson, head of retirement client experience and communications at Bank of America in Boston, said that because some HSA investment providers only allow employees to invest their funds once they reach a certain amount of savings, it’s important for employers to educate employees during the year so they will know when they can invest and how to do so. A report from Devenir says those who invest their HSAss have an average total balance six times larger than those who don’t.
Experts at the 2021 PLANSPONSOR HSA Conference in April discussed the confluence of financial wellness and retirement, and how employers can maximize HSAs to help employees achieve both financial and retirement security. First, they said, plan sponsors should merge the categories and discuss the two during the same season.
“Plan sponsors think of retirement at one point in the year and health care in the other part of the year,” said Greg Puig, vice president of benefits consulting services at Sentinel Benefits and Financial Group. “We need to bring the strategic initiative at an employer level, but also add benefits and education within that equation.” The solution is to add retirement planning as part of the benefit, and not as its own separate category, Puig noted.
During the 2020 PLANSPONSOR HSA Conference, William Applegate, vice president, industry relations, Fidelity Health Solutions, said the best way to get people to open an HSA is to integrate education about the accounts with retirement savings and to make investing the assets in the HSA automatic.
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