More Than Half of Employees Contributing to Both HSA and 401(k)

While some studies show that debt and unforeseen bills are derailing some employees’ efforts to save for retirement, an Alight Solutions study finds an encouraging element—most employees are not foregoing 401(k) contributions to contribute to health savings accounts (HSAs).

The 2017 study, which fielded responses from over a million people at 34 large employers receiving recordkeeping services from Alight, found 57% of HSA-enrolled participants are contributing to both their HSA account and 401(k), among 61% who are participating in their 401(k) and utilizing employer-sponsored health insurance.

While pay, age, gender and health care plan coverage all play determinants in HSA and 401(k) participation, pay is the chief factor, according to Alight. Participants with higher income will likely contribute to both plans. Seventy-nine percent of those earning $100,000 to $250,000 a year will add to an HSA and 401(k), while only 24% of respondents earning $20,000 will.

While pay leads in influence, age and gender are key contenders when considering participation, says Alight. After witnessing mass financial setbacks during the Great Recession, Millennials are characteristically reported as young, juvenile savers with a head-on approach to retirement saving. However, just 30% of those ages 25 to 29 with earnings of $20- to $40-thousand a year contribute to the two plans, and 44% of those in the same age category but netting $40- to $60-thousand will save in the HSA and 401(k). Yet, the report shows that across the board, all participants are likely to save in both as their age increases, with greater contributions as well. Millennials were also found more likely to enroll in an HSA-eligible plan. Fifty-percent of the generation are currently enrolled in such a plan, compared to 44% of those in Generation X and 39% of Baby Boomers.  

Additionally, Alight found that more women will contribute to their 401(k) and HSA than men—a surprise as women have halted savings because of the gender pay gap and career breaks. Men, though, were reported as more likely to contribute to the 401(k).

A 2017 report from the United Benefit Advisors found HSA use is steadily rising in employer health plans, with 35.1% of sponsors of high-deductible health plans offering the savings vehicle. Another study found more employees are using HSAs as a savings mechanism for future medical needs, although other studies have revealed a lack of participant knowledge about features of HSAs.

To encourage plan usage and educate workers, Alight suggests employers benchmark participant behavior with their plan’s data; add their 401(k) plan into annual enrollment; support HSAs by promoting the plan’s saving or health aspect; and craft modelers to show projected effects from saving in either one or both vehicles.

More information about the study can be found here.