John Larson is the Principal of Investments & Growth Initiatives, BenefitWallet®, Conduent Human Resource Services.
A Look at HSAs as a Retirement Savings Vehicle and Conduent’s Approach to HSA Investment Options
Employers and Benefits Administrators today operate in a complex landscape. Finding the ideal mix of benefits, at the right cost to the company and employees, has become more challenging than ever. The burden of this complex landscape is shared by employees, who must navigate plan options to find the right mix of benefits that allows them to keep some cash in their bank accounts. Employee benefits professionals and HR leaders must respond to the needs and demands of their employees while protecting the bottom line too.
One benefit that is underutilized, and sometimes misunderstood within companies, is the Health Savings Account (HSA). Many organizations today have chosen to offer high deductible medical plans, and along with those come HSAs. But not all HSAs are created equal — and perhaps more importantly, not all HSAs deliver the breadth and depth of investment options employees demand (or need).
If you haven’t looked into HSAs for your company, it’s important to understand what they are – and also what they’re not. An HSA is a form of savings account that allows employees to save pre-tax dollars out of their paycheck to pay for qualified medical expenses. The money employees contribute is tax free going into the HSA, it’s tax free when they take it out to pay for qualified medical expenses, and participants (employees) may earn federal tax-free capital gains when they invest their money in the longer term investment accounts that HSAs offer.
That third point is the one that’s most often misunderstood by both employees and some employers: A Health Savings Account has the potential to produce real investment value, much like a 401(k) retirement savings plan. In fact, we urge employers and employees to think of an HSA as yet another type of retirement savings vehicle.
That’s not to say that employees shouldn’t invest in their companies’ 401(k). If a 401(k) is available, a company’s goal should be to get every employee participating in the plan. But if your company is not in a position to offer a 401(k), the HSA can be an excellent opportunity for employees to both pay for qualified medical expenses and save for retirement. If you already offer a comprehensive 401(k) plan, then the HSA offers an important supplemental investment opportunity for employees once they’ve maxed out their 401(k) match. The HSA offers more immediate flexibility than a 401(k) while providing all of the long term benefits.
Sounds simple, but did you know that only 6-7% of the eligible employee population with access to an HSA investment account are currently taking advantage of it? That’s a huge missed opportunity.
At Conduent, we’ve been working strategically over the past year to ensure that our BenefitWallet HSA offering delivers the lowest cost array of high performing funds in the industry, with solutions for all types of investors (much like a 401(k) fund lineup). We’ve segmented our investment offerings into three different strategies to give both novice and experienced investors high-performing, low-cost choices:
BenefitWallet’s new investment portfolio gleans best practices from the retirement investing industry. As of November 1, 2018, the plan offers participants 30 funds to choose from, 21 of which are brand new to the lineup. Check out the full portfolio here.
As with any investment offering, returns are not guaranteed: the money in these funds is not FDIC insured and participants may lose money during market cycles.
If you’ve considered offering an HSA to your employees and need some help getting started, or if you want an HSA with more diverse investment options, contact us anytime. For more information on BenefitWallet, click here.
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