Benefits January 19, 2021

Evaluating HSA Providers

What employers should ask to make sure they choose the right health savings account (HSA) provider for their employees.
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Choosing employee benefit service providers is a fiduciary act, and employers need to know what to ask to keep participants’ best interest in mind. This applies not only to retirement plans, but to health savings accounts (HSAs) as well.

Steve Neeleman, founder and vice chairman at HealthEquity, says it’s important to start with the basics. Plan sponsors should ask how long the company has been in business and whether HSA administration is its primary business. “A lot of banks do this on the side,” Neeleman explains. “I feel companies that do a few things well are better at it than a jack-of-all-trades.”

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Keeping in mind the best interest of participants, plan sponsors might want to consider the ease of HSA use when selecting a provider, though that shouldn’t be their only determinant. “The plan sponsor may use a certain health plan that is integrated with an HSA provider, and that can facilitate ease of use,” Neeleman says. “If participants can enroll in the health plan and check a box to enroll in the HSA, it’s easier.”

Offering 24/7 service rather than only answering the phone from 8 a.m. to 5 p.m. is also best for participants, Neeleman says. “Many employees seek care after hours and on weekends,” he notes. “We take 20% of participant calls when banks are closed.”

Holding cash in an HSA is similar to having a savings account, and participants earn interest on their accounts. Neeleman says plan sponsors should check whether cash accounts are insured by the FDIC [Federal Deposit Insurance Corporation]. Providers that are not FDIC-insured might offer a higher yield on cash accounts, but plan sponsors should determine which is the best scenario for their participants, he adds.

Education is important, too. “Many employees, especially those first starting an HSA, don’t understand them,” Neeleman says. “Providers should offer education.”

Neeleman suggests finding out providers’ net promoter score (NPS). The NPS measures customer experience and predicts business growth. “It shows how likely customers are to recommend a provider,” Neeleman explains.

Most HSA providers offer debit cards, which makes it easier to pay claims, Neeleman says.

J. Kevin McKechnie, founder and executive director of the HSA Council at the American Bankers Association, says the debit card should be able to recognize eligible expenses when participants use it. He notes that there are still HSAs that leave the onus on the participant to only use funds for qualified expenses.

While a key to choosing health plan providers is the health care provider network, a key to choosing an HSA provider is ease of use, and that doesn’t just mean having a debit card, McKechnie says. “How easy is the website to use?” he queries. “What happens when an employee wants to move his HSA to a provider of his choosing?”

McKechnie reminds plan sponsors that while they offer an HSA provider to their workforce, the law allows HSA owners to have their account at any financial institution of their choosing. A participant could move his HSA to his bank, if the bank offers that service.

A debit card makes paying for services easy, but employees should have a choice for how they want to pay. “Some may tell providers to bill them because they want their insurance company to adjudicate the claim first so they’ll know what exactly they owe the provider,” McKechnie says. “The HSA provider should have an internet portal where participants can go to pay what they owe using their HSA funds or another account.

“In every case, there needs to be a record of those transactions, so that if the IRS audits the HSA, it can be determined that it is qualified,” McKechnie adds. “It’s unlikely a taxpayer’s HSA account would be audited by the IRS.”

“We believe an integrated solution with a lifetime claim vault is best in class,” Neeleman says.

Many HSA providers offer the opportunity to invest HSA assets, Neeleman adds. “Being able to invest right off the bat is also good for participants,” he says. He reminds plan sponsors that the quality and cost of funds offered for HSA investing should be evaluated. He adds that some HSA providers also offer robo-advice tools to help participants select investments.

While participants overwhelmingly use their HSA funds to pay for current medical expenses, any funds left in accounts should have the opportunity to grow for participants’ use in retirement, McKechnie says. “Plan sponsors want an HSA administrator that offers investment choices, and plan sponsors should be able to choose to offer the same investment choices as they do in their defined contribution [DC] retirement plan or not,” he says.

McKechnie says plan sponsors should ask providers: Do you have a fully functioning broker/dealer (B/D) model? Is it yours or do you partner with another firm? What investment options are in it? What do you do to make sure investment options are the best performers?

Plan sponsors should also determine whether there are any costs to participants for setting up and maintaining their accounts, McKechnie says. “In the early years, there were fees, but those have nearly been extinguished by market forces.”

Neeleman warns sponsors not to forget to ask potential providers about their privacy measures. “We’re not only talking about financial data, but health data,” he says. “Make sure the firm takes things like HIPAA [the Health Insurance Portability and Accountability Act] seriously.”

Neeleman stresses that financial cybersecurity is really important. “As balances continue to grow—HSA balances are approaching $100 billion nationally—fraudsters follow the money,” he says. “Make sure providers have processes in place and use two-factor authentication. Ask what they do to remedy fraud.”
Administration January 15, 2021

Helping Workers Rebuild Their Retirement Savings Post-Pandemic

Plan sponsors should stress the need to save for retirement and allay fears about market volatility, among other things.
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Art by A. Richard Allen

Many workers might have tapped into their retirement savings or cut back on or completely eliminated their contributions due to the coronavirus pandemic. And some employers might have cut back on or suspended their matches as well. Some workers might have panicked when the markets tumbled in March and even gone so far as to take their money out of the market and been too afraid to get back in, thereby losing tens of thousands of dollars of retirement savings.

Sandy Pappa, a principal in Buck’s wealth practice, says employers are acutely aware of these setbacks and are “experiencing a lot of consternation about what to do to help employees.”

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Pappa says the first thing employers should do is to figure out which employees were impacted by the pandemic and send targeted messages to them. “The first message employers should underscore is to encourage people to save in the plan,” she says. “That will impact how much retirement income they will have when they are ready to retire.”

The next thing employers need to address, for all employees, is allaying their fears over market volatility, says Elizabeth Woodburn, director in the engagement practice at Buck. “If employers don’t address this topic, employees won’t hear anything else they have to say,” Woodburn says. “Speak to them about how markets have behaved and bounced back after other crises. Recordkeepers can help you there with all kinds of statistics.”

The next thing employers should do is educate their employees about all the benefits available to them and ensure that they know where to find information about them, says Charlie Nelson, CEO of retirement and employee benefits at Voya. “Many individuals are not fully aware of all of the benefits available to them, particularly voluntary benefits such as critical accident or hospital indemnity insurance. These will give them some financial protection in case of an emergency.”

In line with that, many workers and employers alike have a newfound appreciation for the importance of having emergency savings, as well as replenishing those savings if they have been used during the pandemic, Nelson says. In fact, he says, he expects more employers will establish automatic emergency savings accounts alongside retirement plans.

Pappa says it is also important to let people know that if they took out a coronavirus-related loan, they have three years to repay it, starting in the year they took the distribution. “This will ease their tax burden,” she says.

For those employers that suspended or curtailed their matches last year and are reinstating them, that is a great message to get across to employees, Woodburn says. “This would be a great time to dangle that carrot in front of employees,” she adds.

During the pandemic, many recordkeepers waived fees for loan initiations and distributions, Woodburn notes. “Now may be a good time for sponsors to temporarily pay plan administrative costs,” she suggests.

Plan sponsors that don’t already automatically enroll or escalate their workers’ savings should consider these critical plan design elements, as well as re-enrollment, says Pete Welsh, head of retirement services at Millennium Trust.

And, if an employer is going to implement auto-enrollment, they need to automatically enroll their workers at a meaningful savings rate of 6% or higher rather than the long-accepted 3% rate, adds Sri Reddy, senior vice president, retirement and income solutions at Principal.

Workers are also looking for financial wellness programs from their employers, says Shane Bartling, senior director, retirement, at Willis Towers Watson. This is particularly true for women and minorities, who are more likely to work for small to mid-sized companies, which have been the hardest hit during the pandemic, Bartling notes. Workers are also hungering for advice from independent financial counselors, he adds.

Finally, the message to employees should be that every little bit of savings helps, and they should be encouraged to increase their savings this year and next year, Woodburn says.

Woodburn adds that plan sponsors should make the messages engaging, even if they are about dollar-cost averaging and volatility. “Make it actionable and use humor,” she suggests.

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