Without significant education, many employees do not understand their HSA benefits. They often get them confused with flexible spending accounts, for example, or they fail to see how HSAs could affect their own circumstances with regard to financial wellness and retirement savings.
This was the conclusion of a panel of industry experts at the 2022 PLANSPONSOR-PLANADVISER HSA Conference, which discussed the “what,” “how” and “when” for HSA education and communication. The goal of the discussion was to help plan advisers, plan sponsors and individual employees get engaged with HSAs and gain the most from the rapidly growing savings vehicle.
To illustrate the importance of educating employees about HSAs and health care, Amy Richardson, Fidelity go-to-market and product support vice president, said that almost 50% of people expect to spend less than $100,000 in retirement for medical expenses. But a healthy married couple can expect to spend closer to $300,000—more than triple what many families anticipate.
“Another important note is that over 40% of people have considered postponing retirement in order to be able to cover health care expenses, and 31% of hardship distributions from 401(k) plans are for health expenses,” Richardson said. “Being able to leave the money in the HSA to allow it to have the compounded growth for retirement is important, but also being able to access it for medical expenses without it being taxable or penalized is another really great factor for having an HSA for your employees.”
The average account balance for a 401(k) or 403(b) plan today is around $100,000—or less than half of what a married couple can expect to spend on care in retirement, observed Jamie Greenleaf, OneDigital retirement and wealth senior vice president. A key part of HSA education, she explained, is helping people to see that such a wide health savings gap exists in the first place. Too many people expect their medical spending needs in retirement to be covered by Medicare, when in fact this program often covers only a fraction of an individual’s retirement health care expenses.
“Educating people about getting into an HSA early is so important,” Greenleaf said. “It used to be you retired at age 65, and you kicked the bucket at age 67 or 70. Now we see people retiring at age 60 to 61 and living until age 90 or even 100. The retirement expenses just went up substantially, for health care and for everything else.”
Richardson emphasized that education about the advantages of a high-deductible health plan with an HSA option should occur throughout the year, as educating people only during the annual open enrollment period risks overwhelming them.
“You need to meet them where they are and be responsive in your communications,” she suggested. “Some workers might enroll just to get the employer contribution. What we would do with that person is then focus on communicating to them the next steps that they should take. We may educate them on why they may want to put more of their own money into that plan. Like saving in a 401(k), using an HSA successfully is a journey from start to finish. If you put all that on someone right at the very beginning of the journey, it is too much information.”
The panel also discussed the importance of getting information to employers who still do not fully appreciate the benefit. Scott Riordan, vice president of health and welfare services at Sentinel Benefits & Financial Group, said it is also critical to ensure that the employer does not run afoul of any tax or labor rules or regulations that can apply to HSAs.
One common misconception is that anyone can enroll in an HSA, Riordan said. In order to take advantage of an HSA, employees need first to be enrolled in a high-deductible health plan. Thus, it may make sense for employers to start their education with HDHPs, so the benefits of an HSA make sense to employees. Another misconception is that funds will automatically be invested. In reality, administrators will usually require accounts to meet a minimum balance and employees to make a request before funds can be invested. All of this information should be communicated clearly between the employer and employee.
“It is particularly important that employees understand the accounts are individually owned, so they will have the HSA even if they leave their employer,” Riordan said.