How one employer opened workers’ eyes to the benefits of HSAs

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LAS VEGAS — While employers have long touted the cost-savings benefits of using high-deductible health plans coupled with HSAs, many workers are unaware they can save these tax-advantaged accounts for another purpose: retirement expenditures.

Sara Caddy, benefits manager with Dimensional Funds Advisors, a private investment firm, helped to change the way employees look at HSAs by educating them about its value as a retirement tool, not just something to be used each time the employee visits the pharmacy.

“The HSA is such a fascinating plan and it can be so beneficial to so many people, but people still think of them as FSAs and a lot of that mindset needs to be changed through communication,” Caddy said during a panel at the 2019 Benefits Forum and Expo. “We made great efforts to communicate the benefits of an HSA plan. We really tried to move it a bit away from healthcare and a bit more into the retirement bucket.”

Investment in HSAs is growing. The number of HSAs has exceeded 26 million with assets that top off at $61.7 billion halfway through the year, according to the latest research from investment advisory and consulting firm Devenir. Devenir projects by the end of 2021 the HSA market will approach $88 billion in HSA assets held by more than 30 million accounts.

Employers understand the benefits of an HSA. More than half of employers offer a high-deductible health plan that is linked to a savings account, such as an HSA and 56% offer HSAs as a benefit, according to data from the Society for Human Resource Management.
Caddy says the approach Dimensional took to HSAs had dramatic results, with greater employee enlistment. Some 80% of the HSA funds at Dimensional that have gone into the plan are invested versus being put into in cash accounts. About 52% of our HSA participants at Dimensional touched their funds in the last 12 months.

“We spent a lot of time communicating the HSA plan as part of a retirement strategy, versus a card in your wallet to use every time you go to the pharmacy,” Caddy said. “Those efforts really paid off.”

Thanks to the effective communication on the part of the employer, Dimensional's employees know they can use this money in retirement, rather than every time they need to get a prescription.

“It’s singing the praises of the plan over and over again and giving employees some other avenues to save some money, so they don’t feel the need to reach into their HSA,” Caddy said.

Employers are placing greater emphasis on employees emotional, physical, and financial well-being because they know when a worker has access to tools to improve their lives, they will be a more productive employee. HSAs, are one way that employers can invest in worker’s well-being, which promotes loyalty and reduces turnover rates long term.

“Employers really have to look and see what their staff wants, what their staff needs,” Caddy said. “Listen to them and cater your benefits package to that. You’ll find a lot of very quick and easy ways to provide some cost saving opportunities to your staff that are a lot less stressful than you’re imagining.”

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