PLANSPONSOR - December 2021 - January 2022 - 15

about how the accounts work. Only onethird
of respondents said they are " very
familiar " with HSAs. In addition, the
survey found, only 32% of respondents
understand that HSAs are beneficial for
both short- and long-term expenses. Just
42% said they know HSAs may be used
for investing.
While plan sponsors may use the open
enrollment period to tell employees how
HSAs work, says Steve Neeleman, founder
and vice chairman of HealthEquity, the
best time to really educate them on the
subject is after open enrollment.
Lisa Margeson, head of retirement
client experience and communications
at Bank of America, concurs. Employees
will sometimes need to have a minimum
to be able to invest the funds, so educating
them during the year, when they have
been saving for a while, will show them
when they can invest and how to do so.
The results of investing the accounts
can be substantial. A report from Devenir
says those who invest their HSAs have an
average total balance six times larger than
those who do not.
Most account holders, however, miss
out on this potential by being underengaged,
says Philip Massey, director,
client service and delivery at Willis Towers
Watson.
He cites the value of HSAs to pay
for health care in retirement, referring to
recent research by his firm. " Our study
estimates that a couple retiring today
will spend over $300,000 for medical
expenses in their lifetime, " he says.
By not participating in an HSA
benefit, employees also miss out on tax
advantages, Massey adds. " Contributions
can be made tax free, but distributions are
also tax free. Even 401(k)s don't offer that. "
HSAs offer cost savings for
employers, too, observes Inci Kaya, strategic
adviser, Aite-Novarica Group's
Health Insurance, as employee contributions
are not subject to any Federal Insurance
Contributions Act (FICA) tax. She
suggests that employers use their portion
of that savings to hire new talent or give
employees a bonus.
For employees, having access to an
HSA is only part of the story. They need
to be able to understand how the account
works and how to use it to maximize the
savings impact, says Michelle Costo,
senior product director for MetLife's
health savings and spending account
business. MetLife research has found
that most employees are unable to handle
a $3,000 medical expense, she adds.
There is a confluence between
financial wellness and retirement, and
HSAs are a useful tool to help with both,
experts say. First, plan sponsors should
merge the categories and discuss the two
during the same season, they say.
" Plan sponsors think of retirement at
one point in the year and health care in the
other part of the year, " says Greg Puig, vice
president of benefits consulting services
at Sentinel Benefits and Financial Group.
" We need to bring the strategic initiative
at an employer level, but also add benefits
TIDBITS
Is It Time to Update the
4% Withdrawal Rate Rule?
In 1994, financial planner Bill Bengen demonstrated
that a 4% withdrawal rate, with annual inflation
adjustments, had succeeded over most 30-year
periods in modern market history. It has been
accepted as a safe standard since then. Morningstar
researchers set out to determine whether 4% still
applies today.
Using forward-looking estimates for investment
performance and inflation, they found that a 50%
stock/50% bond portfolio should support a starting fixed
real withdrawal rate of about 3.3% per year. This rate
assumes a fixed real withdrawal over a 30-year time
horizon and a 90% probability of success.
Source: Morningstar, " The State of Retirement Income: Safe Withdrawal Rates "
PLANSPONSOR.COM December 2021 - January 2022 15
and education within that equation. " The
solution is to add retirement planning as
part of the benefit and not as its own separate
category, Puig says.
The best way to get people to open an
HSA, says William Applegate, vice president,
industry relations, Fidelity Health
Solutions, is to integrate education about
the accounts with that about saving for
retirement and to make investing the
assets in the HSA automatic.
" People who invest their HSA savings
have a balances that's four times higher
than those who don't invest, at every step
of the way, " Applegate says, citing findings
more conservative than Devinir's,
but still impressive.
People with both an HSA and a retirement
account have a total of $216,000 in
savings, vs. $114,000 if they have only a
retirement account, he says. People with
both defer an average 10.6% of their salary,
vs. 6.7% for those having just a retirement
account, he says. -Rebecca Moore
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