PLANSPONSOR - October-November 2022 - 13

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Contrast in Colors
Fewer Americans than last year who are Black, indigenous or people of color, vs.
white Americans, said they feel prepared to financially support the various things
they'd like to do over the course of their life.
62%
Black/African
American
68%
Hispanic
72%
Asian/Asian
American
78%
White
Source: Allianz, " Allianz Retirement Risk Readiness Study 2022 "
Obstacles to HSA Investment
MORNINGSTAR'S " 2022 Health Savings
Account Landscape " reports that HSAs
have grown at a 31% rate over the past 15
years. Yet, " [their] use could improve, as
only 9% of accounts had invested assets
in them, " says Tom Nations, associate
director, multi-asset and alternative strategies,
at Morningstar and the paper's author.
For a few of the findings, invested
HSA assets are now $26.4 billion, up from
$4.5 billion in 2017. Also, high-deductible
health plans-an employer's prerequisite
for offering HSAs-covered 28% of
workers in 2021, up from 4% in 2006.
When HSAs do include an investment
option, ideally the holder may invest
what she saves, as she would in a 401(k) or
other employer-sponsored defined contribution
plan, letting the money compound
to pay for qualified medical expenses in
retirement. Of added benefit, her contributions
are tax-deductible:
Investment
growth, interest and dividends are taxexempt,
and withdrawals for qualified
medical expenses are tax free.
HSAs' potential for this purpose has
yet to be fulfilled, Nations points out.
" That HSAs have grown so rapidly and
91% of accounts aren't using the investment
feature means there's pretty good
runway ahead. "
The study found, too,
though,
that
the accounts still have confusing features
and needless hindrances to the person
investing assets. While providers have
significantly improved their offerings since
Morningstar's first study, in 2017, Nations
says, there remains room for them to incorporate
better practices. " Notably, fees could
come down across the board, " he says.
Also stymying investing, some HSA
providers require account holders to meet
and keep a minimum cash balance or
spending account minimum before they
may invest. " We think best practice would
be to not require that, " Nations says. " Many
providers have moved that down to zero. "
In need of improvement, as well, he
says, is the process for onboarding newuser
accounts, as many of the products
separate the investment features from
spending features.
" Many times HSAs are actually two
spending
separate accounts: There's
a
account and the investment account, "
he says. " If you sign up for an HSA,
what you're actually signing up for is the
spending account only, and then, if you
fund it, you need to take the additional
manual step of opening up the investment
account, tying it to the spending account
and then funding the investment account
after funding the spending account.
" There are these additional hurdles
and sludge, which really complicates the
process, " he says.
Morningstar advises culling the
investment lineup. Large menus that offer
duplicate strategies and asset classes may
" lead to analysis paralysis, that overwhelm
the end investor, " Nation says.
-Noah Zuss
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