Few Use HSAs as Retirement Savings Vehicle

While more Americans are using health savings accounts (HSAs) to pay for medical expenses, few are using them as a retirement savings vehicle, investing the funds or maxing out their contributions, according to a new EBRI report, “Health Savings Account Balances, Contributions, Distributions and Other Vital Statistics, 2017: Statistics from the EBRI HSA Database.” EBRI’s database covers nearly six million HSAs with $13 billion in assets.

EBRI estimates that there are between 21.4 million and 33.7 million policyholders enrolled in HSAs, and that nearly three in 10 employees own an HSA. Since 2014, more than three-quarters of HSAs, or 77%, have been created.

Seventy-seven percent of HSAs with a contribution in 2017 also had a distribution. Among the HSAs with distributions, the average withdrawal was $1,724, less than the average contribution. Two-thirds of account holders ended 2017 with positive net contributions.

Ninety-five percent of HSAs with individual or employer contributions in 2017 ended the year with funds to roll over for future expenses. The average balance at the end of 2017 was $2,764, up from $1,873 at the beginning of the year.

Fifty percent of HSA owners contributed to their account in 2017. However, 36% of HSAs did not have any contributions, either from employees or employers. The average contribution by individuals in 2017 was $1,949, with employers contributing an average of $895. Only 13% of HSA owners contributed the maximum amount permissible.

Only 4% of HSA owners invested their money. Among this group, 69% took a distribution. Among those who did not invest their money, 31% took a distribution. When distributions were taken, investors took larger distributions ($2,293) than non-investors ($1,696).

“The rise of HSAs is an encouraging sign for future financial wellness,” says Paul Fronstein, director of the health research and education program at EBRI. “However, plan sponsors and administrators will need to educate account holders about the benefits of moving beyond cash when investing HSA assets and explaining how contributing closer to the maximum allowed by law will increase the likelihood of being able to cover uninsured medical expenses in the future. The HSA should be viewed as an important retirement savings vehicle.”