Brokers take notice – HSAs (healthcare savings accounts) are one of the hottest healthcare plan options in 2017. Whether it’s offered by an employer or created by an individual independently, enrollment has steadily increased since they were first introduced in 2004.
After 13 years of increasing demand, its clear HSAs are here to stay. It is crucial that brokers truly understand what sets them apart from the others, and how both consumers and business-owners can use them.
Most typically, HSAs combine high-deductible health plans (including the popular HDHP plans – which we discussed in a recent Ease blogpost) with a health-savings account. That means instead of paying a premium for your healthcare, consumers have flexibility over what their money goes to, while they are still putting away enough money to cover their typical appointments and blood tests, as well as any unexpected healthcare costs that may pop up along the way.
HSA contributions are tax-free or tax-deductible (if submitted post-tax) and unlike the ever-popular FSA (flexible savings account), HSAs roll over year-to-year.
While these aren’t truly considered retirement accounts, and should still first and foremost be considered for their ability to put money away towards potential unexpected health costs, they do serve as an additional outlet for lifetime savings. This is particularly helpful after one’s 401(k) and IRA are maxed out – as noted in a blog post written by financial investment firm Betterment. While funds can easily be withdrawn at any time of the year without penalty for medical expenses, contributors can also withdraw their savings for nonmedical expenses after the age of 65. It should be noted that this withdrawal is contingent upon a 20% penalty and will include taxes.
That said, if an HSA is started at an early age, it will still result in a significant contribution to one’s retirement funds. This is particularly pertinent in a time where retirement is not currently an option for many Americans (per the ‘retirement crisis’ noted in a recent article from The Motley Fool.) Plus, an increasingly popular work benefit is employer contribution to HSAs (sometimes even matching) which will help accelerate the accumulation of funds overtime.
On a parallel path, per an article written by Eileen Baldwin-Shaw – ERISA consultant heading up First Western Trust’s Third Party Administrative Services practice – in MarketWatch: “For small-business owners this is a simple, out-of-the-box way to beef up a bare-bones benefits package — and save some time and money. For employees, it’s a tax-free way to save for the future, whatever it may be.”
Essentially, HSAs are a great tool for both consumers and business-owners as they offer increased flexibility over healthcare spending without sacrificing stability, while also acting as a supplemental retirement account. Brokers who can leverage these HSA plans accordingly will see employer and employee satisfaction for years to come.