Strengthening HSA engagement with 401(k)-like features
Most plan sponsors would agree: A 401(k) plan and Health Savings Account (HSA) are important components of employees’ financial health and wellness. Contributing to both tax-advantaged accounts can help employees build their savings for retirement. Now, there’s a new trend that could make this combination of benefits even more powerful. A growing number of plan sponsors are taking best practices from their 401(k) plan and applying them to their HSA program, according to the 2022 HSA Survey published by the Plan Sponsor Council of America (PSCA).
Making it automatic
For example, automatic programs have proven to be effective 401(k) plan design strategies to combat participant inertia and encourage positive financial behavior.1 Plan sponsors are finding that automatic solutions can work in the same way for HSAs. In fact, according to the PSCA survey, more than 40% of employers are automatically enrolling employees in an HSA when they select a high-deductible health plan.
More than 40% of employers are automatically enrolling employees in an HSA when they select a high-deductible health plan.1
Investable funds for potential long-term growth
The investing aspect of 401(k) plans is also being integrated into HSA program design. Up to 80% of larger organizations offer employees the option to invest funds in their HSA1 for potential long-term growth.2 The survey also revealed that HSA investing is gaining momentum among employees, with more account holders choosing to invest assets when they have the option compared to just two years ago.
Account rollovers are another 401(k)-inspired feature that plan sponsors are adopting to support HSA growth. Nearly 60% of employers, according to the PSCA survey, allow rollovers from other HSAs for new hires, and nearly two-thirds of employers encourage them.
Yearlong employee education
Employee education is essential in helping employees optimize their 401(k) account and the same is true for their HSA. According to the survey, about 60% of plan sponsors educate employees about HSAs during open enrollment. But there’s opportunity to take a page out of the 401(k) best practices playbook and establish ongoing, yearlong education programs to help employees understand the role of HSAs in long-term financial planning. In addition, combining HSA and 401(k) education can help employees understand the tax-advantaged benefits of these accounts and how they work together to support retirement goals.
- Connect with your Bank of America representative on plan design strategies to help optimize your HSA offering.
- Download the PSCA 2022 HSA Survey.
1 Plan Sponsor Council of America’s 2022 HSA Survey.
2 Investing involves risk, including the possible loss of the principal value invested.