Investing HSA Savings Is Key to Building Accounts

It is also important to fund accounts right away.

According to Devenir’s 2019 Midyear HSA Market Statistics & Trends report, there are now over 26 million health savings accounts (HSAs), holding $61.7 billion in assets, a year-over-year increase of 12% for accounts and 20% for HSA assets for the period ended June 30, 2019.

The growth is understandable as HSAs are now being touted as a vehicle for saving for health care expenses in retirement. New guidance from the IRS, which expands the list of preventive care benefits permitted to be provided by a high deductible health plan (HDHP) under section 223(c)(2) of the Internal Revenue Code without a deductible, or with a deductible below the applicable minimum deductible (self-only or family) for an HDHP, offers the potential for even more growth.

The Devenir report suggests HSA providers, employers and employees are seeing the advantage of being able to invest their HSA savings. HSA investment accounts have an average total balance of $15,982—six times larger than a non-investment holder’s average account balance. There was $13.3 billion estimated in HSA investment assets as of June 30—an estimated 35% year-over-year increase. Devenir says 22% of all HSA assets are in investments as of June 30th, 2019.

But, employees will not reap the benefits of HSAs if they don’t fund them. Devenir continues to see seasonality in the percentage of accounts that are unfunded. Accounts are often opened during the fall open enrollment season, but remain unfunded until early the following year. Halfway through 2019, about 15% of all accounts were unfunded, similar to a year ago.

Jack Towarnicky, executive director of the PSCA, has said employers struggle with telling employees how to allocate their savings dollars. He suggested that employers make sure the HSA account is open with the employer or employee contributing at least one dollar, and it can be funded later to cover expenses incurred. Ken Forsythe, head of product strategy at Empower Retirement, noted that if the account is not open with the first dollar, employees cannot get any potential employer contributions. Entry-level employees to top executives need HSA education.

Devenir’s report is available here.