With Americans living longer than ever before, the standard 401(k) plan is not enough to keep them afloat in old age.
Experts say employees should invest not only in retirement plans but also health savings accounts to supplement Medicare benefits to manage future healthcare costs.
The combination of HSAs and 401(k) plans is the latest trend in retirement savings, and insurance providers are starting to offer products for both financial wellness and health insurance, according to a panel at Employee Benefit News’ Benefits Forum & Expo last month.
“HSAs are really just a sweet spot of health-meaning-wealth,” said Deborah Macchia, executive director, global benefits at ITT Corporation. “Our struggle is mainly helping employees understand that.”
Traditionally, HSAs and 401(k) plans were thought to exist in silos and a benefit consultant would help deliver health and welfare benefits, such as employer-sponsored medical and voluntary; while an independent retirement consultant would help organizations create 401(k)s and 403(b)s to save for retirement.
However, the panel, which consisted of Macchia, WageWorks’ Chief Compliance Officer Jody Dietel and HSA Council at American Bankers Association’s Executive Director J. Kevin McKechnie, said the two should be thought of as two necessary components of a retirement plan.
Dietel said HSAs offer a triple-tax advantage: all deposits are tax-free, the investment grows tax-free and money can be withdrawn tax-free to cover qualified medical expenses.
For retirees, healthcare costs continue to consume a large portion of retirement savings and income, said Jeffrey Petrone, managing director of SageView Advisory Group, at EBN Benefits Forum & Expo’s “401(k) of Tomorrowland” session. He said the biggest barrier for plan sponsors is the current retirement landscape, which “has kind of evolved in silos.”
“Integration will happen, but it will take someone to break down the barriers,” he said.
Employers can assist with the breakdown of those silos by giving employees another tool to meet the retirement burden, added Dietel, but it won’t be within the open enrollment paperwork.
“Stop with the big stack,” she urged the audience. “Maximize employee engagement on HSAs.”
She continued: “You could contribute to your bottom line by improving participation rates. Oftentimes, that’s really missed.”
The panelists also agreed that HSAs investors average a higher return compared to a 401(k), but not all employees are aware of these benefits.
“We can pay every claim dollar, we can fund everything known to man, but if we’re not helping you [save], we’re doing a disservice,” Macchia said.
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