Health Savings Account Education Needed Now
Health savings account education can assist employers in getting the most out of two great employee benefits. Health savings accounts (HSAs) and employer-sponsored retirement plans (401k)s can be combined to maximize tax-free and tax-deferred savings that can be used in both, the short term and the long term. However, fully understanding the HSA’s benefits requires a strong and thorough health savings account education. Benefits professionals understand the need for health savings account education at the company level.
HSAs are a benefit that continues to gain attention and interest. HSA consulting firm Devenir indicates there were 25 million HSAs at year-end 2018. This represents a 13% growth from 2017 to 2018, according to its 2018 “Year-End HSA Market Survey.” One of the biggest challenges employers face is that many employees confuse HSAs with flexible spending accounts (FSAs). The benefits world is an alphabet soup of acronyms, which accounts for some of the confusion. However, HSAs are the only benefit of their kind to offer a “triple-tax” advantage. That means the participants’ contributions go into the HSA on a pre-tax basis. Investment earnings grow tax-free inside the account over time, and the money can be withdrawn tax-free, as long it is used to pay for qualified medical expenses. However, employees can only participate in an HSA if it is paired with a high deductible health plan.
A strong health savings account education program at the company level is required so that the company can be in a position to clearly and regularly communicate HSA benefits to company employees. Many employees have a difficult time understanding how HSAs can aid the worker in their savings.
According to a recently released survey on HSAs conducted by the Plan Sponsor Council of America (PSCA) educating employees on the benefits of HSAs should be a top priority for employers. PSCA found that 62% of employers ranked health savings account education as their top concern according to the report, which was cited by Workforce, a media outlet for HR professionals. Administrative concerns ranked a distant second for employers behind health savings account education; while slightly less than 16% said it was a priority.
Despite the acknowledgment that health savings account education is important, many employers only talk about their HSA benefits during open enrollment. This may contribute to employee confusion about HSAs. Without ongoing health savings account education, the message about HSAs is less likely to remain front-and-center in the employees’ minds. In the absence of a solid and ongoing health savings account education effort employees are less likely to take advantage of this employee benefit they do not fully understand.
The survey findings bear this out. According to the PSCA report, the majority (76%) of plan sponsors only offer health savings account education during open enrollment. Just 21 percent — less than a third — offer health savings account education at times of the year other than open enrollment. Among the most popular forms of health savings account education were group presentations (59.9%), HSA “how-to” guides (56.6%) and flyers (45.1%).
Interestingly, plan sponsors are not leveraging technology for health savings account education as often as might be expected. Education via mobile technology ranked last, with only 15.4% of sponsors using it to inform employees about HSAs. What better way to make HSA education easy to access and understand that by using a device that’s always within reach? According to Glen Kvadus, vice president of Optum Financial Services, who was quoted in the Workforce article, employers need to take the confusion out of health savings accounts, and providers need to make participating “as easy as shopping on Amazon.”
Research from Willis Towers Watson shows that 82% of employees perceive medical costs as their biggest challenge today and in retirement. HSAs can help workers manage those costs both now and, in the future, because they allow employees to save for today’s medical costs and invest any unused funds for the long term. That money will grow over time, giving workers a nest egg to tap for healthcare costs in retirement. This is why more employers are looking at ways to integrate their HSA offerings with their existing retirement plan, and why recordkeepers and other retirement plan service providers are offering the technology and platforms designed to enable employers to do so. Integrating the HSA and the retirement plan helps improve retirement readiness. It also helps employees to meet their current healthcare costs and invest for future healthcare expenses, providing them greater financial security in retirement.
Sponsors should offer year-round health savings account education around their HSA offerings to entice employees to participate. Companies should give strong consideration to leveraging mobile technology as a way to reach more employees with health savings account education. Most importantly, employers should help improve workers’ understanding of how they can effectively use HSAs to pay for healthcare costs. Doing so will help employees make the most of their HSA benefits while they’re working, and they’ll also be better prepared to manage their healthcare costs in retirement.