Facts You Haven’t Learned About HSAs

One overlooked benefit of HSAs is that people can actually spend money on qualified health care expenses out of pocket and then reimburse themselves tax-free via the HSA once they enter retirement. 

Fi360 and HSA Bank hosted an informational webinar for retirement plan advisers focused on the evolving topic of health savings accounts (HSAs).

Shelby George, CEO of Perspective Partners, hosted the webinar, which featured HSA Bank Senior Vice Presidents Kevin Robertson, John Young and Ann Brisk.

According to the trio of HSA experts, the landscape for these important investment accounts has reached a tipping point. Certain groups have been early adopters of HSAs—the innovators. But according to the HSA Bank team, the evolution of HSAs has moved from an initial period of innovation to a period of mainstream adoption.

Today, nearly one in four people in employee benefit plans qualifies to own an HSA, the experts said, and many Americans find themselves in “consumer driven health plans.” The HSA experts said employers are making such plans more attractive from the perspective of employees because such plans have proven effective in helping employers control health care costs—and so employers want employees to accept and favor such plans. They said the evidence is clear that the promotion of consumerism in health care helps to reduce costs for everyone, employers and employees, and promotes the prudent use of health care services.

The experts noted the HSA industry has started to see explosive growth, in part because a greater portion of HSA assets are being invested. Between deposits and investment growth, the HSA marketplace stands at some $60 billion, a figure that could grow as high as $90 billion or $100 billion in just the next few years.

The experts pointed to various HSA facts that can help advisers promote health care savings even more effectively. For example, people might not understand is that HSA assets can be used by retirees to pay for Medicare premiums, as well as long-term care premiums, on a tax-free basis.

Another major benefit of HSAs is that people can actually spend money on health care out of pocket during their career and then reimburse themselves tax-free via the HSA once they enter retirement. This means that, if a person spent $50,000 on care in their lifetime before retirement and has maintained the proper paperwork and documentation, then in retirement, they can reimburse themselves for those expenses, tax free, and then use the reimbursed income for any purpose. The experts also noted that the money in an HSA is not factored into Medicare means testing.

According to the HSA experts, advisers tend to have a lot of technical questions about things like, what happens if a person dies with HSA assets. There are a lot of complicated answers for the complex questions, so they recommended that advisers seek out expert resources to learn from. Oftentimes, CPAs will know this information, and there are many highly detailed written resources.