You’ve made it. There’s a light at the end of the tunnel, and a new year is here. And no, 2021 won’t be a cure-all, but it sure feels good to have a fresh start, doesn’t it?
If you’re like a lot of employers right now, you’re facing some tough financial challenges, and you’re looking for any possible way to manage budgets and save money. And your employees are just as concerned about their finances as you are.
That’s why benefits pros should be especially focused on HSAs as we head into 2021. Why? Let’s break it down:
HSA benefits for employers
Drive smarter healthcare spending and saving
There’s no end in sight for rising healthcare costs. So teaching your employees to be smarter healthcare consumers year-round is key—and HSAs are the way to make it happen. They’re an MVP when it comes to healthcare saving and spending:
- Employees aren’t taxed on anything they save in their HSAs
- HSA dollars can be invested for future medical expenses or retirement
- HSA contributions roll over to the next year, so there’s no scramble to spend in December
Plus, an employer-sponsored HSA is a great partner for a high-deductible health plan. HDHPs, with their low monthly premiums, can be really cost-effective for young, healthy employees. But they could also mean hefty out-of-pocket expenses before employees meet their deductible. So HSAs are a great way to fill in those gaps.
There’s just one problem: employees aren’t currently saving enough in their HSAs to cover their medical bills. The average employee contributes $1,949 each year—but faces an average of $4,049 in out-of-pocket expenses.
That means you should be encouraging them to contribute even more to their HSAs each year—and perhaps even max out their contributions—so that they can cover those substantial out-of-pocket expenses.
Employees are missing out on HSA tax benefits
The fact that employees aren’t saving enough to cover their out-of-pocket expenses should be reason enough to up their contributions.
But they’re also getting hit with a double whammy: HSA contributions aren’t subject to taxes. So if they’re paying for healthcare without the help of their HSA, they’re missing out on tax advantages too:
And if you offer an HSA with investment options, even better! HSAs are a great way to save for retirement, but employees aren’t taking full advantage of that option. In fact, of the 29 million open Health Savings Accounts in 2020, only 1.5 million accounts (roughly 5%) are investing.
So finding clearer, simpler ways to explain HSA tax benefits, and how they’re crucial to help employees save on taxes now—and save for the future.
Leading employers know how important HSAs are
Today’s top companies are working hard to drive higher HSA enrollment, because they know just how valuable HSA tax benefits for employers can be—and that HSAs offer strong financial advantages for their employees, too. And they’ve been fairly successful! In fact, by the mid-2019, HSA enrollment was up 12%, with the number of open Health Savings Accounts estimated to reach 30 million by 2021.
So that’s the good news. But there’s still a lot of work to be done when it comes to getting employees to actually use their HSAs. The hard truth is that 15% (or almost 4 million) Health Savings Accounts were completely unfunded last year. And only 25% of employees consider saving in an HSA to be a top priority—even though 82% see medical expenses as their biggest financial challenge.
The answer? Better benefits education and engagement
We know that when employees save more in their HSA, it’s good for their wallet and yours. And we know employees are starting to catch on, with more and more people opening a Health Savings Account.
But there’s a missing piece of the puzzle. Employees don’t understand how to use their HSA—how much to save, what expenses it’ll cover, and how they can turn HSA savings into retirement funds. And that’s because benefits education is a huge struggle: 56% of employers say employee education is their primary concern when it comes to HSAs.
The answer is to pair HSA enrollment with smart, personalized benefits guidance—not just during open enrollment, but to help your employees reduce their healthcare spending year-round. These five tips for improving your HSA communication are a great place to start:
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5 Tips for Boosting HSA Adoption and Contributions
And while there’s a lot you can do manually to help employees understand and use their HSA, a financial guidance tool like ALEX is the key to driving real results.
What is ALEX?
Powered by behavioral science and proprietary technology, ALEX is a financial and benefits guidance software platform that helps your employees make smarter, wallet-friendlier choices about their health plans, retirement, and tax-savings accounts—and helps employers save money on premiums, payroll taxes and more. ALEX is available online 24/7 and can be implemented in a matter of weeks.
- Saves time and money by offering one-on-one benefits decision support without the administrative burden for HR teams.
- Drives meaningful financial outcomes. Because ALEX is unusually good at explaining the value of your benefits, employees make smarter decisions about which plans to choose, and how much to save in their HSAs.
- Boosts benefits understanding and engagement with straightforward, human language and personalization to help employees better make smarter choices–something even the best PowerPoint presentation on earth can’t do.
And it works.
in their HSAs than the national average
in payroll tax savings for their employers
total to their HSAs every year