How HSAs Can Bridge The Health & Wealth Gap: Start Educating Employees Now

In 2023, employers received mixed news regarding retirement savings payments. On the one hand, employees are more interested than ever in these benefits and expect employers to help them learn more about how to save for retirement. On the other hand, persistent concerns about the economy lead many Americans to believe they are reluctant to save for retirement.

A new report from Voya Financial highlights the valuable role health savings accounts (HSAs) can play as a supplement to a retirement savings plan. The report, titled "Boosting the Power of HSAs for Health Savings - Now and in Retirement," explains that the tax-advantaged treatment of these accounts can help workers put money aside for retirement.

One important point is the "triple tax advantage" of HSAs: The Voya report notes that HSA contributions are tax-free, earnings on HSA investments are tax-free, and withdrawals are also tax-free. That gives investors more flexibility with these accounts, officials said, but they need to better understand how these savings plans can help them.

"Most employees don't fully understand how HSAs work and, as a result, don't know how to effectively take advantage of these benefits," said Nate Black, vice president of healthcare product development at Voya. “When it comes to support in this area, employees need their employers to educate them about HSAs and help them make benefit decisions.

The retirement savings gap is widening

The report begins by noting that many Americans believe they will not reach their retirement goals. "Many workers do not have enough savings to cover health care and living expenses during retirement," it said. “At the end of 2020, the average 401(k) plan balance for workers in their 60s was just $350,000. When health care costs eat up nearly half of those savings, it can seriously hurt their ability to meet other financial needs in retirement. »

The report explains how HSAs are an untapped tool that can help close the retirement health savings gap: “HSAs can help close this health and wealth gap if employees are properly trained on how to use them. But American consumers don't fully understand how HSAs work and how the accounts can help them meet their long-term, or even short-term, health savings needs. »

Voya's consumer study found that about half or less of American workers have a good understanding of the features of an HSA. Additionally, their 2022 survey found that 62% of respondents said the reason they invest in an HSA is to pay for everyday health care expenses; 61% also see it as a way to get money for future health care expenses. But only 25% see it as a way to save money on health care in retirement.

Providing employees with additional information about HSAs

The report examines several strategies to better communicate the value of HSAs to employees and design an HSA program that works well for their employees. The report found that nearly a third of respondents said they would like to receive education and advice from employers on how to save for work, how to invest and how to build emergency savings. The 2022 survey found that 18% of employees said they want more information about what they contribute to their HSAs, a 4-point increase from the 2021 survey.

Such education can last a year. "Voice of America research shows that nearly two-thirds of employees (65%) are open to receiving benefits information from their employer beyond open enrollment to help them understand their benefits," Black said. . “Therefore, digital support tools are also an important consideration, especially when it comes to choosing employee benefits and helping employees understand not only which solutions will meet their individual needs, but also how they use them. these benefits.

Other steps recommended by the report include using personalized messaging, emphasizing the tax benefits of HSAs, framing the use of HSAs in the context of saving for unexpected medical expenses, and providing investment advice to employees.

The need for more education is clear, the report said, as the survey showed that only 3 percent of respondents could correctly identify all the features of an HSA. But continued efforts in education will pay off in many ways, officials said. "Providing easy access to information, tools and guidance to help make benefit decisions can help employees improve their overall financial well-being," Black said. "Additionally, with open enrollment season approaching, now is an opportune time to make sure people understand that HSA can offer enrollment solutions."

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