1 – HSAs are Popular – Especially Among Millennials
High deductible health plans (HDHPs) have become more common to control premium costs while still endorsing smarter healthcare spending. 2,500 companies were surveyed by benefits consultant Mercer in the years 2014, 2015, and 2018. In 2014, 48% of these U.S. based companies offered HDHPs, 59% in 2015, and 75% in 2018. As you can see, HDHPs are gaining in popularity.According to the Kaiser Family Foundation, in 2006, 10% of employees were enrolled in employer-sponsored high-deductible plans. This number rose to 51% in 2015, with around half of America’s Millennials choosing the affordable premium plans.
2. They Are Affordable & Portable
Who can get a Health Savings Account (HSA)? HSAs are offered to those under 65 years of age with a high-deductible employer or individual health insurance coverage. This plan’s deductible must be of $1,300+ for an individual and $2,700+ for family coverage. If an employee were to change employers, the HSA is not affected; the HSA follows the employee to the new employer. Once the money is deposited into the savings account, the funds are the employee’s responsibility to save, use, or invest. No expiration date exists, and the money can be passed to beneficiaries upon death.
Q: Must a business be a certain size to offer HSAs?
A: No. As a low-cost alternative to help keep premiums under control, HSAs are common among individuals, small businesses, and large businesses.
3 – They Increase Consumer Engagement & Control
If you want to help your employees feel like they are in control of their money and capable of managing it as they see fit, consider offering HSAs. Employees can choose if they spend their money on prequalified, medical expenses or retirement savings. With an HSA, employers can advise their employees on the best decisions for health and financial well-being.
Q: What’s the difference between an FSA & HSA?
A: The infamous use-it-or-lose-it provision the FSA is so well-known for doesn’t apply to an HSA. Instead, HSAs provide retirement options and the possibility of employer contributions. It’s advised to educate employees about the similarities and differences between FSAs and HSAs to increase awareness and engagement in utilizing the account.
4 – They’re an IRA in Disguise
Just like in an IRA, employees can contribute to and accrue interest in their HSA. When you consider the triple tax advantages of HSAs, it’s easy to see they are a great choice for investment dollars. Contributions to the account are pre-tax, or tax-deductible, and all earnings, interest, and investment returns are also tax-free.Funds from an existing IRA can be rolled over into an HSA. This option is just once-in-a-lifetime, but one to consider when looking at the tax advantages of HSAs. The end goal is to be sure the HSA compliments an employee’s existing portfolio – that includes their 401(k).
5 – They Drive “Stickiness” & Account Retention
It’s important to pay attention to your employees. Holding HSAs for your employees tends to increase their “stickiness” and decrease the likelihood that they will leave the company. Account retention is the goal here.Remember, the money stays with the employee in an HSA – even when it is an employer contribution. Additionally, any money left over in the account at the end of each year rolls over to the next year, staying in the account – tax-deferred and earning interest.