2024 marks the 21st anniversary of the creation of Health Savings Accounts.
HSAs remain contemporary as ever despite sweeping changes in how we work, socialize, get information, and take care of our health and finances. The Great Recession, the housing crisis, and the COVID-19 pandemic reshaped the economy and healthcare system, and Artificial Intelligence promises further changes, but the flexibility of the HSA allows employers to meet the present moment, whatever it holds.
A flexible benefit, HSA’s unique, triple-tax advantage enables an increasing amount of account holders to save on current healthcare expenses, while building a financial safety net for retirement.
While HSAs are no longer a new benefit, they are often misunderstood and underutilized by both employers and account holders. To better offer insight into how organizations use HSAs, Lively anonymously surveyed 250 HR leaders across the United States and multiple industries in partnership with CITE research. The goal of this survey was to understand how HR leaders are using HSAs, what they look for in an HSA provider, and the challenges they face when it comes to HSA adoption.
Based on these findings, we recommend key action items for employers and benefits brokers that can support HSA adoption and education, and share insights into how to design a modern benefits package with Health Savings Accounts as a key component.
What are the advantages of an HSA?
HSAs are personal savings accounts that can be used for IRS-qualified, health-related expenses with contributions limits set annually by the IRS. To qualify for an HSA, account holders must be enrolled in a qualifying High Deductible Health Plan (HDHP), for which the minimum deductibles, out-of-pocket maximums, and other guidelines are set annually by the IRS for individual and family plans.
HSAs are especially unique because they are owned by the account holder, not their employers, and can be transferred from job to job or institution to institution, similar to an IRA. Contributions are 100% tax deductible and HSAs have a triple tax advantage: Tax-deductible contributions, tax-free interest and investment growth, and tax-free withdrawals for medical expenses. HSAs never expire and after an account holder turns 65 they can use the account for any range of expenses - medical expenses remain tax-free, while other expenses are taxed at the account holder's current tax rate.
of HR leaders say HSAs are effective in attracting and retaining employees
of organizations offer an HSA
Why are HSAs more important than ever?
As the economic uncertainty continues and healthcare expenses continue to rise, HSAs can help both account holders and their employers save on healthcare costs, payroll taxes, and insulate themselves against future expenses. As both employers and individuals look to economize, HSAs tax deductible status has become even more important. Contributing to an HSA reduces the account holders tax burden and employer contributions are also tax deductible, reducing an employer’s FICA taxes.
As employers look to rework their benefits offerings to attract and retain employees, while reducing their budgets, an HSA puts money in employees’ pockets without adding to payroll tax burden. It can be combined with post-tax benefits, such as Lifestyle Spending Accounts and Medical Travel Accounts, to create a robust benefits package that flexibly meets employee needs.