Vice President, Market Insights
Beth McHugh is vice president for Fidelity Investments’ Personal and Workplace Investing division.
Beth is responsible for developing trend-based insights and points of view about employer
benefits programs. Since joining Fidelity in 1989, Beth has held several leadership positions within
the company working with clients and prospects. She received a bachelor of arts degree from
Mount Holyoke College.
How are Health Savings Accounts (HSAs)
impacting retirement savings?
Employers face the dual challenge of managing ever-rising healthcare costs and equipping employees for a
solvent retirement. Meeting both is essential to the long-term success of an organization and its ability to
manage its human capital effectively. Through strategic benefit design, employers are deploying strategies
that potentially ensure their participants are saving for retirement and solving for the rising costs of healthcare.
Employees with a health savings account are saving more for retirement
Despite a sluggish economic environment, the average employee 401(k)
contribution edged higher to $5,750 in 2011, up from $5,680 a year ago,
as participants on average continued to defer more than 8% of their annual
salary. 1 It is encouraging that contributions actually held up during the
past year given the market action, as the evidence is clear that increases
in contributions, however small, can make a significant impact over time.
While this is good news, many employers seeking to reduce their health-care expenditures are exploring high-deductible health plans (HDHPs) with
an HSA component, but they question whether HSA participation comes
at the expense of 401(k) savings. Fidelity’s analysis of plan participant data
shows that it is not a zero sum game. In fact, the opposite is true. HSAs,
a critical component of HDHPs, can have a beneficial relationship with
Participants with an
HSA defer an average
of 8.9%—nearly a full
higher than the 8%
average of those
without an HSA.
While the average 401(k) deferral rate has hovered at 8% since 2009, a Fidelity study reveals that the average
deferral rate for employees who also contribute to an HSA is nearly a full percentage point higher at 8.9% (as
of December 31, 2010). In addition, the analysis indicates that HSA participants across all income levels save
more in their 401(k) plan than the average 401(k) plan participant. This is especially true for lower-compensated
employees — those earning $20,000–$40,000. HSA participants in the lowest income bracket defer almost 2%
more in their DC plan than the average DC participant. 2
This suggests that the presence of an effective HSA program featuring annual employer contributions does not
hinder 401(k) savings. Offering both a 401(k) and an HSA provides the opportunity for employees to utilize two
tax deferred/advantaged accounts, enabling them to save not only for retirement, but also for their current and
long-term health care needs. This strategic approach to benefits design indicates that as more organizations strive
to build a “culture of savings” among their workforce, employees are taking advantage of the benefits offered.