The majority (75.3%) of employers responding to the Plan Sponsor
Council of America’s (PSCA)’s HSA Snapshot survey view health savings
accounts (HSAs) as part of their retirement benefits strategy.
Nearly
60% of the respondents believe HSAs should replace flexible spending
accounts (FSAs), and nearly three-fourths of employers think HSAs should
be open to all employees, not just those enrolled in a high-deductible
health plan (HDHP).
Based on the employer responses, about 80% of
employees are eligible to participate in the HSA, when offered by the
employer. The average HSA account balance was $3,161. A little more than
40% of respondents indicate that 25% or fewer of their participants use
up the entire HSA balance every year and an additional 35% of plans
state that 26% to 50% of their participants use their entire balance
every year.
More than 80% of the employers reported contributing
to the HSA, where two-thirds provide a set dollar amount based on the
HDHP coverage tier. Many plans (40%) front-load contributions at the
start of the year, while 30% contribute each payday.
More than
half of respondents reported covering the cost of HSA maintenance fees
for active employees, and 6% pay them for terminated employees.
Only 21% of surveyed employers are concerned about the fiduciary liability of sponsoring a HSA-HDHP.
Unreliable Financial News Making Investing, Retirement Decisions Harder
There are some things plan advisers and sponsors can do to help defined contribution (DC) plan participants refrain from reacting to unreliable financial news.
Unreliable financial news is
impacting Americans’ ability to make retirement, investment and health
care decisions, according to a telephone survey of 1,018 adults
conducted in March 2017 for the American Institute of CPAs (AICPA) by
Harris Poll.
Kelley Long, CPA/PFS and member of the AICPA
Consumer Financial Education Advocates group, who is based in Chicago,
explains that such news includes articles with scare tactic headlines
that really have not a lot of basis. It can also include phishing
websites, such as “Click here to learn more about how you can make
$10,000,” then it steals a person’s financial information. In addition,
reactions to world news, such as the Greek financial crisis and Brexit
caused people to reacted strongly, and they lost money.
The
survey found more than three in four (77%) Americans feel it’s important
to act fast to make financial decisions when breaking financial news
becomes available, with 40% saying it’s very important to act quickly.
Financial
news mediums use scare tactics based on something happening every day
that investors shouldn’t react to, Long says. She notes that defined
contribution (DC) plan design intends to discourage participants from
playing the market. “With mutual funds, you get end-of-day pricing no
matter when you make a call to change investments. Participants don’t
understand that,” she says.
There is widespread awareness about
the issue of unreliable financial news. Nearly three in five Americans
(58%) believe unreliable news is a serious threat to their financial
decision making, with more than half of those saying the threat is very
serious. Those sentiments are consistent for both genders, among
household incomes and across generations.
According to the survey
more 63% of Americans say the spread of unreliable news has made it
more difficult to make critical financial decisions. Specifically,
they’re having a harder time with health care decisions (44%), investing
in the stock market (40%), retiring (36%) and buying or selling a house
(35%).
“There are people who are afraid of losing all their
money and feel they can’t retire. They invest too conservatively for
their timeline,” Long notes. “In addition, pre-retirees move everything
to cash, but when the market doesn’t fall, they move back to equities.
This does them harm, and they accidentally delay when they can retire.”
NEXT: Helping participants not react to unreliable financial news
Long has a few suggestions for plan sponsors and plan advisers to
help participants not react to unreliable financial news. First, she
says there is and information technology (IT) solution. The plan
sponsor’s IT department can be aware of sites that offer unreliable
financial news and put up a firewall so employees don’t click through,”
she suggests.
Long also says plan sponsors and advisers should
provide participants with education about how to be a smart investor and
how to recognize unreliable news.
As far as plan design, she
says, “One client we worked with only allowed employees to make
investment changes once a year during a three-month period. This is a
best practice. Employees can’t react unreasonably, and it forces
employees to take a long-term view and analyze their investments once
per year.” She also says it reinforces the fact that the plan is meant
for long-term investing.
If such a practice is not possible, Long
says, plan sponsors can make participants who want to make a change
talk to the plan adviser first to make sure it’s the right decision.
Unfortunately,
most Americans don’t think the problem of unreliable financial news
will be resolved in the near future. Only 14% say they expect unreliable
financial news to become less prevalent in the next year or two, with
32% saying it will stay about the same. A majority of Americans (51%)
expect unreliable news and misleading headlines to get more prevalent,
with more than half of those saying that it’s going to get much more
common.
Fake news is nothing new, but increased awareness of the
threat it places on financial decision-making can help keep Americans
from being lured into making decisions that will hurt them financially,
the AICPA says.
The poll was conducted by telephone within the United States between
March 24 and 27, 2017, among 1,018 adults (505 men and 513 women ages 18
and older) including 650 adults self-identified as “non-retired” and
322 as “retired.”