Does your company’s HSA need a Health Investment Policy Statement?
As the value and utility of a health savings account becomes more apparent to employers and employees alike it also becomes easier to draw parallels between the HSA and what we have learned from similar vehicles in the benefits ecosystem. Taking it one step further, if we make the leap to viewing our health savings account as not only an excellent way to pay for today’s healthcare needs but, also a great way to invest for future healthcare expenses should we be digging deeper on the investment options made available to us?
To answer that question it makes good sense to cover some of the more common but, very important inquiries we at Access Point HSA often get from employers surrounding investments within an HSA.
What is an investment threshold? Simply put an investment threshold is the minimum level of cash that must be in an account before an account holder can begin to take advantage of the investments available within the HSA. Most often dictated by the HSA provider, some are high, some are low and some HSA providers have no investment threshold at all. Based on our research, thresholds between $1,000 – $2,000 in the cash account prior to investing is standard.
What should be the risk profile of our HSA investment lineup? If this money is to be used for healthcare expenses should investments, both higher risk and lower risk, be made available to the account holders? The real question is when will this money be used for healthcare expenses? Time frame is a critical determinant of risk tolerance and needs to be addressed accordingly.
Does it make sense to mirror the investments in our 401k? All else being equal, there could be tangible benefits to having the investments in the HSA the same or similar to what is offered in the 401k. One such benefit is that education and communication is potentially easier and more understandable for everyone involved.
What is the risk and reward of offering a Self-Directed Brokerage window? Self-Directed brokerage has both advocates and detractors and given its individualized nature its role in the HSA is something employers should consider.
What is the average expense ratio of the funds made available? We have all seen what high expenses can do to a long term investment portfolio. It is completely appropriate to ask for the true cost of investing and how those fees are being allocated.
One solution to many of these questions and issues is an investment policy statement for the HSA. With the help of a solid and trustworthy financial adviser/consultant companies can now take what they have learned from the 401k and begin to apply it to other areas where employee dollars are being invested. As always, each of these questions must be viewed through the lens of the individual company.
What is good for one large manufacturing outfit may not be the best course of action for another and may be completely different or even counter to what is best for a smaller professional firm. Whether a company is extremely paternalistic with its employees or keeps an arm’s length as it relates to matters of investing and planning there is a role to play for a solid and well-constructed roadmap.
