HSAs and 401ks: a Winning Combination

HSAs and 401ks

HSAs and 401ks: A Winning Combination. Employers are recognizing that health savings accounts (HSAs) and workplace retirement savings plans are no longer “siloed” benefits. In fact, both can work very well in combination with each other synergistically to boost workers’ physical and fiscal health. As such, employers should adopt a holistic approach to the way they look at these benefits and how their workforce can utilize them.

A new survey from benefits administration and HR solutions provider Alight Solutions looks at the relationship between HSAs and 401ks, who uses them, and how much workers typically save in each.

Here’s some good news: Alight found that 61% of workers are enrolled in employer-sponsored health insurance and contribute to a 401k plan. Here’s the not-so-good news: a full 10% of workers have opted out of both their employer’s health insurance plan and the 401k.

According to Alight, compensation plays a significant role in whether or not workers choose to elect health care coverage and participate in the 401k. Workers making more than $40,000 are more likely to participate in both.

Alight asked the question: Who contributes to both the HSA and 401k when eligible? They found that one in five employees contributes to an HSA. That is a positive sign, because as Alight points out “HSAs can supplement 401k accounts and provide workers with another vehicle to help save for retirement expenses.”

The Employee Benefit Research Institute (EBRI) estimates that workers will need between $131,000 (males) and $147,000 (females) saved to have a 90% chance of having enough funds to cover their healthcare expenses alone in retirement. So using an HSA is important. That 20% of employees use them is encouraging, but that number should be higher if today’s workers are going to be adequately prepared to absorb the high cost of healthcare in their retirement years.

Some other key findings from the study:

  • 57% of employees contribute to both an HSA and 401k.
  • Lower paid workers aren’t as likely to enroll in an HSA-eligible healthcare plan — just 44% of workers with salaries below $60,000 were enrolled in an HSA-eligible plan vs. 53% earning at least $60,000.
  • Younger workers are more likely to enroll in an HSA-eligible healthcare plan: 50% of millennials chose an HSA-eligible plan, compared to 44% of Gen Xers and 39% of Baby Boomers.
  • Workers with covered dependents, i.e., spouses or children, are less likely to choose an HSA-eligible plan.

What can employers do to promote these benefits? Alight suggests:

Benchmark behavior: Does your workforce behave similarly to the data show

Robyn Kurdek

Robyn Kurdek

Freelance writer with nearly 2 decades of financial industry experience, with niche expertise in the defined contribution (DC) industry. I also have defined benefit (DB) plan knowledge. I write all types of content for retirement plan participants, sponsors and advisors, including web copy, newsletters, white papers, fact sheets, blog posts, financial wellness articles, and more. "I speak DC."
Robyn Kurdek
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