Entry-Level Employees to Top Executives Need HSA Education

More than half of respondents to the Plan Sponsor Council of America’s (PSCA)’s first-ever survey on health savings account (HSA) design and use, sponsored by Empower Retirement, educate employees about allocating assets between their 401(k)/403(b) plan and an HSA–but employee education remains the dominant concern of plan sponsors (indicated by 60% of respondents).

The survey of 189 plan sponsors found that the most common resources used to educate employees about their HSAs were “how-to” guides (56.6%) and group presentations (59.9%). HSA education takes place primarily at open enrollment for 76.4% of organizations, though one-in-five plan sponsor respondents say they offer HSA education multiple times throughout the year.

During a session at the 2019 PSCA Annual Conference in May, Ken Forsythe, head of product strategy at Empower Retirement, told attendees that plan sponsors should use touchpoints, with suggested actions, to communicate to employees about HSAs throughout the year.

He said there is much confusion between HSAs and flexible spending accounts (FSAs); 56% of employees think HSAs have the same use-it-or-lose-it feature of FSAs, according to PSCA data.

Glen Kvadus, a vice president at Optum Financial Services, told conference attendees there is misunderstanding about HSAs from entry-level employees to top executives, so education should cover everyone. Even plan advisers may not understand the vehicles.

Jack Towarnicky, executive director of the PSCA, said employers struggle with telling employees how to allocate their savings dollars. He suggested that employers make sure the HSA account is open with the employer or employee contributing at least one dollar, and it can be funded later to cover expenses incurred.

Kvadus said there is a trend of employers putting money into employee HSAs upfront so employees have money available on day one. “It helps employees feel a sense of benefit,” he told conference attendees.

Forsythe noted that if the account is not open with the first dollar, employees cannot get any potential employer contributions. As for allocating between retirement plans and HSAs, he suggested employers tell employees to first contribute up to the maximum match in their defined contribution (DC) plan, then contribute as much as they can to their HSA.

The PSCA survey found 81.7% of employers contributed to employees’ HSAs in 2018.

The survey also found 85.7% of HSAs include investment options. Forsythe said many require a minimum balance in cash before employees are able to invest the rest. “It is important to have cash in the account for unexpected expenses,” he noted. “If employees can invest first-dollar, they may have an expense when the market is down and would have to sell at a loss.”

Investing HSA savings can help employees grow their balances for the future. “If a plan sponsor offers an HSA-capable plan and are not somehow connecting HSAs with retirement for employees, they are missing an opportunity to help employees with retirement readiness,” Forsythe said.