The Benefits of HSAs and How to Start a HSA
Health Savings Accounts are gaining popularity allowing employees to save not for what will likely be large health care costs in retirement.
Andy Lovell, VP at the National Benefits Group with 1100 401k plans around the country discusses the benefits of an HSA, how to set one up, which companies qualify and how to determine which HSA provider is right for your company.
Full Transcript Here
Hi, this is Fred Barstein with 401k TV in Las Vegas at the NIPA annual conference. NIPA is the National Institute of Pension Administrators, and we’re lucky to be with Andy Lovell who is the Vice President of ERISA at the National Benefits Group. They’ve been around for 30 years doing ERISA, non ERISA and just in 401k. They have 1,100 clients, and they have clients in all 50 states.
Do you have your own private jet?
Yeah. You can lend it to me. Okay, if we ask you a few questions today? So, today Andy is speaking about HSAs, Health Savings Account, or are they Health Spending Accounts?
You would think they’d get confused, but yes, Health Savings Accounts.
All right. Very good. So, can all companies have an HSA? I mean, what’s the qualification?
Can they? Yes, provided they meet certain requirements. So, Health Savings Accounts have to be paired with a qualifying high deductible health plan.
Right. So, if you don’t have a high deductible, you can get an FSA, but you can’t do an HSA, which are very attractive. So, what’s the attraction of an HSA? Why do companies want to use them?
Certainly. So, the reality for most Americans is that health expenses are continuing to increase, and as we continue to have an aging population, it’s going to continue to be a problem in the future. So savings now and having a vehicle to pay for that health care in the future is a great benefit, because the IRS has allowed us some payroll tax consequences where you can put money into a HSA now, tax free, and it can grow tax free, and as long as you have documentation for your qualifying medical expenses, in the future it can come out tax free.
So, Andy, how much can people put away in their HSA accounts?
So, for 2018 the individual limit is $3,450, and the combined family limit for that is $6,900.
And companies can match on that, too.
Is there a limit on that?
So, that limit is the combined limit for the individual and employer contribution together.
Right. So, some of it could come from the individual, but the employer could say, hey, we’re going to put some money in ourselves.
A plan sponsor a company was thinking of starting one, who would they approach? I mean, which advisor or vendor should they approach?
It’s a great question, because as we talked about, not every plan can qualify for that. So, as they’re looking with their benefits broker and evaluating their benefits packages, that’s the right place to start is ensuring that their benefits plans qualify for it, and then that benefits broker can put them in touch with an HSA provider.
Great. And so final question, so all HSAs are all the same. They’re all created, I mean, how do you distinguish what’s right for you or what’s a good one for you?
Certainly. So, as each company is different and their employee demographics are different, that’s a conversation to have with your benefits broker, because certain HSA providers allow for the HSA contributions to be invested in certain mutual fund options, and certain HSA providers won’t allow that investment. So, if you have an employee base that needs certain opportunities for their HSA funds, that’s a conversation to have with your benefits broker to be aware of what those investment options are, what the fees are for that, how they track things like your expenses. [crosstalk 00:03:53].
Well, great. Well, it sounds like we think HSAs are going to grow, right?
They certainly are, and if you haven’t considered it, you really need to, because it does provide a lot of value for your employees in addition to their retirement plan.
Right. It’s sort of like the DC-ization of healthcare, you know, where the individuals get to spend the money as they want, as opposed to a program like a pension plan.
And ideally as they’re having expenses now while they’re saving for that HSA account, then they would pay those expenses out of pocket, and let that HSA account grow so that in the future, they have that available when they really need that when they’re not working.
And keep the receipts.
Very good. Well, thanks for your time today, and thank you for watching 401k TV. Stay tuned.