While Health Savings Accounts (HSAs) continue to be an important and popular benefit to help employees manage their health care costs, research shows that employees require more education about how HSAs work. In fact, Bank of America Merrill Lynch’s soon to be released 2018 Workplace Benefits Report found that 76% of employees claim they understand how HSAs work, but only 12% could correctly identify the attributes of an HSA.1 Data from the study also suggests that employees are not using HSAs to their full potential to save money for medical expenses, with 53% of employees reporting that they’ve skipped health-related treatments or purchases to save money.1
HSAs are a valuable tool with tax advantages that can help employees manage health care expenses short and long term. Contributions are made with pretax dollars; investment gains are tax free; and withdrawals are tax free for qualified medical expenses—a triple tax advantage.2 Despite the advantages of HSAs, employers are finding the need to combine ongoing education with incentives to help jump start employees financial health and engage them in their HSAs.
For example, employers are offering direct payments or other financial incentives to employees’ HSAs. According to Devenir, 21% of the $27.6 billion contributed to HSAs in 2017 came from employers. Generally, employers contribute a fixed amount or percentage of annual deductibles for high-deductible health plans (the only type of health plan that enables the use of an HSA). Some employers approach contributions to employee HSA accounts through a matching contribution or incentive amount upon completion of certain financial wellness activities. Companies that contribute to participants' HSAs have different strategies about timing the payment—some prefer paying all upfront while others prefer to spread the payments throughout the year.
Combining simplified, ongoing education with employer financial incentives can be an effective way to help employees save for their short-term medical expenses and encourage investing for medical expenses down the road.
Talk with your Bank of America Merrill Lynch representative about health savings programs and engagement strategies to help your workforce move forward on their journey toward financial wellness.
Encourage employees to visit our health accounts website to access a range of HSA educational resources, including articles, calculators and videos.
Offer onsite seminars to educate employees on ways to optimize their HSA.
Source: Pensions & Investments, Employers offer incentives to get more acceptance, April 30, 2018.
1 About the 2018 Workplace Benefits Report: Boston Research Technologies conducted an online survey with a national sample of 657 employees who responded between December 15, 2017 through December 27, 2017 and 667 employers who responded between December 15, 2017 to January 3, 2018. To qualify for the survey, employees had to be current participants in a 401(k) plan and employers had to currently offer both a 401(k) plan and a program designed to improve employee financial wellness; the plans did not have to be provided by Bank of America Merrill Lynch. Bank of America Merrill Lynch was not identified as the sponsor of the study. Full report to be released mid-2018.
2 About Triple Tax Advantages: Participants can receive tax-free distributions from their HSA to pay or be reimbursed for qualified medical expenses they incur after they establish the HSA. If they receive distributions for other reasons, the amount withdrawn will be subject to income tax and may be subject to an additional 20% tax. Any interest or earnings on the assets in the account are tax free. Participants may be able to claim a tax deduction for contributions made to the HSA. We recommend that applicants and employers contact qualified tax or legal counsel before establishing an HSA.
Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
The Bank of America HSA is provided by Bank of America, N.A. (BANA), Member FDIC. Mutual fund investment services for the BANA HSA are provided by Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a registered broker-dealer, Member SIPC and a wholly owned subsidiary of Bank of America Corp. (“BofA Corp.”). Investments in mutual funds are held in an omnibus account at MLPF&S in the name of BANA, for the benefit of all HSA account owners. Investment advisory services for the HSA are provided to BANA by Devenir Investment Advisors, LLC, a registered investment adviser. Devenir is not an affiliate of BofA Corp.