A large number of individuals who consider themselves well-versed on health savings accounts (HSAs) are in for a surprise, as a recent LIMRA report found a disconnect between consumers’ subjective and actual knowledge about the plans.
The research reveals that while 51% of American consumers consider themselves very or somewhat knowledgeable about the features and benefits of HSAs, almost half (49%) of that group wrongly believe an account holder must spend the total HSA balance by year end or risk losing it. Additionally, only 39% of consumers surveyed know the distinction between an HSA and a flexible spending account (FSA).
Whether truly knowledgeable or not, 59% of the Millennials surveyed, along with 55% of the Generation Xers, 44% of Baby Boomers and 28% of the Silent Generation (those over 72) believe they are. The reason for the small percentage of self-reported “knowledgeable” Baby Boomers and Silent Generation members, LIMRA says, is that older workers are less likely to participate in high-deductible health plans (HDHPs), the typical means by which employees are introduced to HSAs. Because HDHPs have lower monthly premiums, LIMRA says, the plans gain more popularity among younger, healthier individuals such as Millennials, who have fewer medical expenses.
In other findings from the study, employees familiar with HSAs were most likely to say they received their information from their employer. Therefore, LIMRA recommends plan sponsors provide employees with solid education on the perks associated with the accounts and how these may contribute to retirement readiness.
While 74% of HSA participants said the accounts play a role in their retirement strategy, LIMRA reports that, on average, HSA holders are utilizing their accounts to cover medical expenses including deductibles, co-insurance and co-payments, instead of benefiting from the tax preference by contributing the highest amount allowed each year. In fact, LIMRA found, only 27% of HSA owners use their account to save for future health care expenses.
More information on the report can be found here.