Findings
from the 2014 Employee Benefit Research Institute (EBRI)/Greenwald &
Associates Consumer Engagement in Health Care Survey (CEHCS) show an increasing
number of individuals have held their health savings accounts (HSAs) or health reimbursement
accounts (HRAs) for three or more years.
One-quarter
(27%) had held their account for three to four years, up from 19% in 2008.
Thirteen percent had held their account five or more years, up from 4% in 2008.
While
the total amount rolled over into HSA and HRA accounts dipped last year ($8.9 billion
in 2014, down from $9.4 billion in 2013), the average rollover amounts
rose slightly (from $1,165 in 2013 to $1,244 in 2014). Rollover amounts
went up with the length of time an individual had held an account. In 2014,
those who had held an account one to two years rolled over an average of $982; those
who had held an account three to four years rolled over an average of $1,421;
and those who had held an account five or more years rolled over an average of
$1,428.
Eleven
percent of individuals had held an account for more than a year without a
rollover in 2014.
Individuals
who had held an HRA or HSA for five years or more had $3,092 in their account.
Those who had held an account for less than a year had less than $1,500 in
their account.
The
latest analysis by EBRI shows that the overall, average account balances in HSAs
and HRAs was $2,077 in 2014, up from $1,356 in 2008. But, accounts with an
employer contribution had higher average balances than those without one:
$2,403 for those in which the employer contributed in 2014 versus $2,046 for
those in which the employer did not.
The
level of the employer contribution also seems to make a difference: Workers whose
employers kicked in at least $1,000 a year had an average of $2,768 in their accounts
versus $2,183 for those who got less than $1,000 from their employers.
The full report,
“Health Savings Accounts and Health Reimbursement Arrangements: Assets, Account
Balances, and Rollovers, 2006‒2014,” is published in the January EBRI Issue
Brief, online at www.ebri.org
Council Supports Keeping Participants in Retirement Plans
The ERISA Advisory Council has made recommendations to support the idea of retirement plan participants keeping their savings in ERISA-covered plans for life.
The
2014 ERISA Advisory Council examined recent movement of participant assets out
of defined contribution (DC) and defined benefit (DB) plans—as plan
distributions or rollovers into retirement accounts not covered by the Employee
Retirement Income Security Act (ERISA), such as individual retirement accounts
(IRAs) or other savings accounts.
The
Council’s report provides ideas for plan administrators and plan participants,
including communication strategies and plan design options to facilitate
lifetime retirement plan participation.
The
Council noted it heard considerable testimony about the various factors terminating
employees might consider in evaluating whether to keep assets in an
employer-sponsored retirement plan, take a cash distribution, or roll assets into
an IRA. According to the report, some factors participants may wish to consider
include:
The
plan’s fees versus the fees of an IRA;
Investment
vehicles offered in the plan versus another savings vehicle;
Availability
of loans;
Tax
considerations;
IRAs
are not subject to ERISA;
Protection
against creditors;
The
need for immediate cash; and
The
health of the participant.
In addition, the
Council looked at considerations for plan sponsors when deciding whether to encourage
participants to keep assets in the plan. According to the report, Robert
Hunkeler, vice president of investments at International Paper and a former
chair of the Committee on Investment of Employee Benefit Assets (CIEBA),
indicated 90% of CIEBA members surveyed
(who primarily represent the investment functions at plan sponsors) indicated
that keeping participants in ERISA-covered DC plans after termination of
employment is a good idea because it will result in lower participant costs and
provide ERISA fiduciary protections. On the other hand, only around 60% of the
surveyed plan participants felt that their company wanted to keep participants
in the plan, and less than one-quarter of the plan sponsors had a program in
place to encourage retention.
Hunkeler
attributed this difference more to the newness of the concept than to
opposition, as less than 10% of those surveyed felt their organization would be
opposed to the concept of employee retention in their plan. He said the primary reasons for
not having a retention program were that “it was a low corporate priority and
that there were concerns about fiduciary liability and cost.”
The
Council looked at notices required when a retirement plan participant requests
a distribution and the information available about distribution options on
certain websites. It offered communication steps for plan sponsors to consider
to encourage participants to stay in their plans and for the Department of
Labor (DOL) to consider in educating and encouraging plan sponsors and
participants.
“Based
on the testimony and statements presented, it is the Council’s view that
participants need more information and advice to make informed decisions about
how to handle potential plan distributions and that DOL can play a role in
providing this information directly through its educational programs and
indirectly by encouraging plan sponsors to provide educational materials to
participants at various stages during their employment relationship and beyond
after employment has ended,” the Council wrote in its report.
The
Council noted that if employer-sponsored plans are to encourage lifetime plan
participation, they will need to include more products and services geared
towards retirees in the decumulation phase of saving. Lifetime income options,
such as annuities, will likely play a more prominent role in the future. The
Council said it believes additional guidance to sponsors about lifetime income,
including an updated DC plan annuity safe harbor, would result in reducing some
of the biggest barriers to inclusion of such options in plans today. Specifically,
the Council recommends that DOL provide additional guidance to encourage plan
sponsors to offer lifetime income options, including an updated defined
contribution plan annuity selection safe harbor; and look for additional ways
to make useful tools available, including the DOL’s Lifetime Income Calculator,
and integrate existing tools such as My Social Security.
The ERISA Advisory
Council’s report, “Issues and Considerations Surrounding Facilitating Lifetime
Plan Participation,” is here.