How Much Do Your Employees Know About HSAs?

Many companies offer robust benefits packages that include things such as employer-sponsored health savings accounts (HSAs). But a staggering percentage of employees don’t know enough about the benefits to take advantage of them. A survey by Plan Sponsor Council of America (PSCA) revealed half of employers offer HSAs, but 69% of employees are not clear on the benefits or uses. Providing education to employees about benefits is as important as providing the benefits. PSCA states, “Employee education continues to be employers’ top concern.” 

When employees don’t understand a benefit, they aren’t likely to take advantage of it. SHRM reports, “Most [HSA] holders aren’t taking full advantage of their accounts and are missing out on substantial rewards…Employers, and HR and benefits leaders in particular, can do a better job talking with their employees about how to get the most out of their HSA.” By educating employees on HSAs, employers help their employees take advantage of the benefit and tailor their health care plans to their own personal needs. Below are some of the basics employees should know about HSAs.

Pros of HSAs

• The biggest advantage HSAs provide is tax savings. These accounts are “triple tax advantaged”. This is because the contributions are not taxed, the earnings on investments are not taxed, and the withdrawals are not taxed (as long as the withdrawals are used for qualifying medical expenses). 
• HSA account holders can choose to invest the money in the account. This allows the money to grow over time and benefit from compounding without being taxed.
• Employers can make contributions to employee HSA accounts, similar to a 401k match.
• HSAs roll over year after year. In other words, the money in the account can continue to grow in the years account holders don’t need to spend the money on medical expenses. This allows holders to build savings for future medical expenses and retirement.
• HSAs stay with the account holder, not the employer. If an employee started an HSA with a previous employer, he or she can keep that money and transfer it to a new HSA or employer-sponsored HSA.

Cons of HSAs

• Only those with a high deductible health plan qualify for an HSA. This means individuals who fund an HSA must be prepared to pay high deductible costs for medical care before their healthcare plan will start to pay.
• The money in an HSA is only tax-free when the account holder uses it for qualifying medical expenses (including dental and vision). If a holder withdraws money for other purposes, he or she must pay taxes and penalties on that amount.
• There are contribution limits, rules on withdrawals, filing requirements, and record-keeping requirements that may burden account holders. 
• Once account holders reach age 65, they are no longer able to contribute to the account, regardless of whether or not they are still employed.

Conclusion

According to a study by Enrich, these are the top three reasons employees aren’t enrolled in an HSA.

• I don’t see the benefit.
• I don’t understand HSAs.
• I don’t have the time to learn about HSAs.

This suggests the gap is not in the benefits, but in the education surrounding the benefits.  

It’s common for employees to receive information about the basics of HSAs and other financial benefits during an open enrollment period. But typically, these information sessions include details on a variety of benefits all at once. This makes it hard for employees to gain a full understanding of each individual benefit.

Third party financial education courses can help employees understand not only what the benefits are, but how to take advantage of them on an individual level. True financial education is personal and takes each individual’s situation and goals into account. Through financial education, employees learn more than just whether or not they qualify for an HSA. They also learn whether it’s in their best interest to choose an HSA-eligible plan, how much to contribute to an HSA, and more. Employers who not only offer great benefits, but educate their employees on these benefits see higher enrollment rates and greater overall employee wellbeing.

Find out how 101 Financial’s Workplace Wellness program helps employees understand how to take advantage of their employer-sponsored benefits.

Sources: Fidelity, Investopedia, Bankrate