PLANSPONSOR - April/May 2020 - 17

Why Some HSA Holders Become Investors
ONLY about 6% of account holders in the
EBRI HSA [Employee Benefit Research
Institute Health Savings Account]
Database invest their HSA savings. EBRI's
study " Are HSA Investors Born or Made? "
finds some of those investors are prone
to invest while others are motivated by
different reasons.
While 90% of employers, benefit
consultants, benefit brokers and financial
advisers surveyed by HealthSavings
Administrators said HSA participants are
either somewhat or very knowledgeable
about using their account as a means of
saving for retirement, just 16% of benefit
professionals said they actually counsel
account holders to invest their HSA money.
Among those who invest their HSA,
EBRI found roughly 63% do so in their first
year of ownership, suggesting that these
HSA investors are " born " -they are immediately
engaged and intentionally invest
their balance as quickly as possible. This
strategy is made easier by HSA providers
that allow for first-dollar investing.
For the other 37% of account holders,
the fact that some HSA providers require
a certain threshold before the balance
may be invested may explain why the
report indicates that they were investors at
some point, but did not start out that way.
However, the study found, other factors
were often involved.
Craig Keohan, chief revenue officer
at HealthSavings, notes that, traditionally,
most HSA providers would require
employees to achieve a certain balance
before they were able to invest their HSA
assets; however, this is changing.
Of HSA investors who EBRI says
are " made, " the study finds the two
most important characteristics associated
with transitioning to investing are
account tenure and balance. Additionally,
if an employee elects to contribute part of
his paycheck to an HSA, this increases
the likelihood he will invest some of the
account-signaling that engagement is
an important determinant, EBRI says.
Taking a large distribution is associated
with a reduced likelihood of transitioning
to investing, which, the report says, may
indicate that account holders try to build
their balances back up first after making
a significant withdrawal.
To encourage employees to use their
HSA as a longer-term savings vehicle,
EBRI recommends employers consider two
strategies. First, account tenure is closely
linked to the decision to invest, which
TIDBIT
Missing the Mark
Both pre-retirees and retirees either under- or
overestimate their longevity, meaning they
could outlive their assets or leave dependents
unprepared for, says a survey report.
Overshot or Undershot Actuarials' Estimates
implies that HSA holders invest because
either they become more familiar with
their account or they learn more about the
benefits of investing, or both. " Therefore,
an education strategy could be effective in
encouraging account holders to invest, " the
report says. Second, finding that account
balance size is closely linked to the decision
to invest, EBRI says employers could
consider contributing seed money to new
account owners' accounts, particularly
those with very high health plan deductibles.
-Rebecca Moore
49%
23%
Estimated within
+/-5 years
Overestimated
by 5+ years
More Likely to Underestimate
* Women
* Higher-wage earners
* Non-college graduates
28%
Underestimated
by 5+ years
More Likely to Overestimate
* Men
* Lower-wage earners
* College graduates
Source: Society of Actuaries, " Longevity Perceptions and Drivers: How Americans
View Life Expectancy "
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