Social Security Uncertainty Bolsters Use Case for HSAs, Proponents Say

Because of rising health care costs and the predicted insolvency of Social Security, experts tout HSAs as a powerful tool to save up for health care expenses.  


With Social Security’s Old-Age and Survivors Insurance Trust Fund projected to be depleted by 2033, and the cost of health care expenses continuously increasing, proponents of Health Savings Accounts say these “triple-tax
advantaged” accounts are the most powerful way for people to pay for health care expenses in the future. 

The Social Security Administration recently announced that the combined accounts of the OASI and Disability Insurance Trust Fund are on track to fall short a year earlier than originally projected. As a result, Kevin Robertson, chief revenue officer at HSA provider HSA Bank, believes Congress will likely raise the age for when one can start claiming Social Security retirement income payments and that people should not plan to rely solely on Social Security funds to pay for their medical expenses in retirement. 

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“If you think about it, in a person’s retirement, health care expenses are going to be the largest single category of need,” Robertson says. “Beyond rent or mortgages or living expenses, health care for the average American is very expensive. … When you’re older, the likelihood of having health issues accelerates.” 

Inflation is also driving up the cost of health care and prescription drugs, which in turn increases the cost for plan sponsors. According to data collected by Mercer, employers are projecting a 5.4% average increase in health benefit costs per employee in 2023. 

Meanwhile, HSAs reached $112.5 billion in assets at the end of January, up 8% since year-end 2022, indicating that more people with high-deductible health plans are investing in HSAs.  

A primary benefit of HSAs is that they offer a triple tax advantage: contributions go in tax-free, the funds grow tax-free and they can be withdrawn tax-free.  

recent survey from the Employee Benefit Research Institute showed that 24% of workers were enrolled in an HSA-eligible health plan in 2022. However, the same survey found that deductibles are also prominent in non-HSA plans, with employee-only deductibles averaging $1,451 in health maintenance organizations and $1,322 in preferred provider organizations in 2022.  

“In other words, many workers are enrolled in health plans with deductibles high enough to be HSA eligible but are not technically enrolled in an HSA-eligible health plan and thus are unable to contribute to an HSA,” the EBRI report states. “Something is holding these employers back from offering HSA-eligible health plans to give workers the means to pay their out-of-pocket expenses through HSAs.” 

Only participants in so-called high-deductible health plans can put money into an HSA. 

Robertson says about 100 million Americans are currently able to use the benefits of an HSA, and that number is growing every year.  

A recent bill was introduced in Congress aims to expand the use of HSAs to a broader cross section of Americans, Robertson explains. Entitled the Health Savings for Seniors Act, the proposed bill would allow people who are enrolled in any type of Medicare to contribute to HSAs. 

“[The bill] would dramatically open up the ability for seniors to better afford health care expenditures, save for their future and stretch those health  care dollars,” Robertson says. “Even if they use the accounts solely as an expense pass-through, they would earn the tax benefits of being able to stretch those health  care dollars further.” 

According to Medicare Interactive, those who are currently enrolled in Medicare Part A and/or Part B cannot contribute pre-tax dollars to an HSA because, in order to contribute pre-tax dollars, one cannot have any health insurance other than an HDHP. Medicare participants can, however, continue to withdraw money from an HSA after enrolling in Medicare to pay for expenses, such as deductibles, premiums, copayments and coinsurances.  

The Health Savings for Seniors Act was first introduced in April 2022 and is backed by Representative Ami Bera, D-California, and Representative Jason Smith, R-Missouri. The bill did not receive a vote last year, but Robertson says it is expected to be reintroduced to Congress at the end of this month. 

Robertson says, if passed, those enrolled in Medicare could contribute to an HSA from any source of money, whether that be a retirement account, regular income or a Social Security payment. 

Unlike flexible savings accounts, HSAs have no time limit for when one must spend the money on qualified health expenses. The IRS allows participants to roll over their HSA funds every 12 months and still maintain the tax-free status.  

“This is one of the reasons why HSAs are so powerful,” Robertson says. “It affords a lot of flexibility and control in terms of what they’re able to do. It doesn’t matter if one is spending now or spending laterthey still get the benefits on the front end and on the back end.” 

Nicole Asher, a senior wealth management adviser at Greenleaf Trust, in Kalamazoo, Michigan, says in order to prepare for the projected Social Security insolvency, plan sponsors need to encourage participation in their retirement plans. 

“Even if somebody starts with [contributing] a minimal amount out of each paycheck, and that grows each time they get a raise, it really does make a difference,” Asher says. “If Social Security cuts are made, people need to be prepared, and the longer they have to prepare, the better off they’ll be.” 

Pensionmark CEO Says Firm Moving to 50/50 Retirement, Wealth Split by Summer

About one year after being acquired by World Insurance, Pensionmark discusses robust pipeline of wealth adviser transactions ahead.


Pensionmark Financial Group CEO Troy Hammond is on track to move the firm from its current split of 80% retirement plan advisers and 20% wealth managers to an even 50/50 makeup by July, the company’s founder told PLANADVISER in an interview Thursday.

“We are moving in a direction of a more balanced organization,” Hammond said from the firm’s headquarters in Santa Barbara, California, with Neel Ray, his newly hired head of mergers and acquisitions, seated across the table. “We’re also adding a lot of services, a lot of features. … We’re looking to buy a lot of organizations and firms that bring unique subject matter and specialization to us.”

Becoming an M&A player is relatively new for Pensionmark. For its more-than-30-year history, the firm had prided itself on growing organically by bringing on affiliate advisers. Now, about one year after being acquired by World Insurance, Pensionmark is diving headfirst into the robust market for wealth management advisories. The growth potential, both geographically and by specialization, is even greater than Hammond had mapped out after the World Insurance deal was inked.

“We are 10 times [ahead of] where we thought we would be,” he says. “The strength of our platform, the strength of World, the flexibility and the way we can transact with advisers are resonating very well with sellers.”

Troy Hammond.

That growth trajectory made Hammond realize he needed a new leader for the M&A team, which had previously been reporting to him. On April 4, Pensionmark announced it had hired Ray from his role as head of M&A at Envestnet; Ray has prior experience at TD Ameritrade, TIAA and Bank of America’s Merrill.

Ray notes that, despite market volatility and higher interest rates, the deal space has continued to be active, even if sometimes transactions happen “creatively.”

“There’s no shortage of opportunity,” Ray says. “The question really is finding that sweet spot in terms of pricing and hoping to get that arbitrage growth when you combine [firms] together so it leads to a higher multiple. That’ll be the challenge and the opportunity in front of us.”

Hammond says the firm is focused on creating a streamlined process in assessing and making a move for advisories. The firm also sees itself as a good fit for “younger advisers that are faster-growing and who want to stay in their business,” he says. “That’s a really great fit for us, and culturally, there’s an alignment there.”

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Yes, It’s About Synergy

So far, Pensionmark has brought on just three advisers since May 2022, but the pace is about to get a lot faster, Hammond says. The firm currently has about 30 firms in the pipeline for review, representing more than 200 financial advisers. Going forward, the firm expects to book about 15 to 20 deals per year.

Like many retirement and insurance benefit aggregators, Hammond sees wealth management as a key offering for clients to provide the full scope of services. While Pensionmark had become dominated by institutional retirement services, it had not intentionally been making that transition, Hammond says. In fact, the firm spun off a wealth management division in 2008, which until then had been about 50% of the business.

About three years ago, Hammond says, Pensionmark made a strategic decision to bring on more wealth managers in locations where it could build on the firm’s existing retirement offerings.

“There’s a tremendous amount of synergy between a retirement and wealth adviser being in the same location, being able to refer business back and forth, and being able to provide holistic services to the client,” he says. “We knew that was an area and a direction that we wanted to go, and we’d been shifting more and more that way. …  Now, with acquisitions, we can really put the pedal to the metal, and those numbers can change a lot faster.”

Adviser-Focused

Pensionmark is also investing in its adviser services and platforms, Hammond says. In the past year, the firm has brought on nearly 40 staff members through hiring or acquisition to build out technology support.

“We love what we have today … but as we look through the window five years and say, ‘Where are we going to be in five years? What will advisers look like in five years? And what kind of capabilities do we want to have?’ We have to start building that today,” Hammond says.

Meanwhile, the firm will be looking for good fits to expand wealth and retirement services in the 300 locations where Pensionmark and World currently have presence. With new hires like Ray and other leaders on the team, that task feels more manageable to the company’s founder.

“These are experienced professionals that come with 20, 30 years of experience that can help us build our business,” Hammond says. “It’s been fun [bringing them on], and we’re just going to keep doing it.”

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