PSNC 2017: Using HSAs Effectively

Day Two of the PLANSPONSOR National Conference, in Washington, D.C., included a panel discussing the relationship between health savings accounts (HSAs) and defined contribution (DC) plans, as well as why high-deductible health plans (HDHPs)—when paired with HSAs—can be good for employers.

On the future of HSAs in conjunction with retirement planning, Jania Stout, practice leader and co-founder of Fiduciary Plan Advisors, said provision of the accounts as a service for employees continues to steadily rise, and more and more employees are latching on. “It’s here to stay, and it’s growing,” she said. Of all of Stout’s clients, 80% utilize an HSA account, while the remaining 20% are seriously considering it.

While Stout’s clients have been embracing the service, the same cannot be said for other sponsors or providers. During the panel, she cited a United Benefits Advisers study detailing HSA enrollment among participants—a mere 17%. “Your health care expense is going to be your most important expense,” she said. “I don’t think individuals realize how much money they’ll need in health care.”

Introduced in 2004, HSAs have only become a focus for employers in the last three to four years, noted Steven Mindy, senior associate for Alston & Bird LLP. Even if the account service is consistently pushed by an employer, Mindy said, most participants will reason applying only the lowest premium to their plan.

In order to engage participants, then, Stout encouraged sponsors to construct handbooks or guides on HSA education and beneficial information. More than general material, it’s the presentation that’s key to motivating employees to participate, she said. “A lot of times it’s not math; it’s just really how you present it to people,” she said.

Additionally, Stout observed, when plan sponsors host 401(k) meetings, this can sway employees to enroll in an HSA. She emphasized how consistently calling it a “savings account” can drive participation, as the word “savings” is drilled into employees’ minds.

NEXT: Flexibility of HSAs

On the subject of joining HSAs with HDHPs, Mindy pointed out that HSAs can be fairly flexible for participants. “People can move their money around however they want,” he said. “The employer must set it up; it’s a process. He explained that HSAs may be counted as a medical expense and, if used as a health care expense, can be subject to exempted tax. “With an HSA, you don’t have to worry about hardship solutions; you don’t have to worry about a loan,” he said.

However, Mindy said, for those on Medicare, contributions to HSAs are not allowed.

While Stout and Mindy encouraged plan sponsors to provide general information and educational materials on HSAs, both warned about crossing the line between employer and fiduciary, where sponsors can get themselves into trouble.

“Our role is changing now,” Stout said. “Now we’re taking more charge with the participants in the investment side as well.”

Mindy stressed that giving personal advice to participants may land some employers in litigation suits. “You have to watch your materials closely to make sure you don’t cross the line and say, ‘You should do this,” he said. “Have counsel review this and make sure it’s just general information.”