Leveraging the Power of HSAs Year-Round with Matt Farrar

Today’s episode features host Kerry Sette, head of Consumer Insights and Research at Voya — a familiar voice to the podcast. With the health benefits open enrollment period ending for companies, this episode is shifting the focus to talk about one benefit that employers are increasingly offering as an option with high-deductible health plans to their employees: Health Savings Accounts (HSA’s). With lots of research conducted by Voya on HSAs, Kerry is joined by Matt Farrar, AVP of Strategic Solutions at Voya to talk more about the power of HSAs. Matt has a great deal of experience with HSAs, but particularly when it comes to helping employers communicate their value to their workforce. Tune in to hear more helpful insights to help employees better understand how to use these solutions year-round.   

1Average couple has expected health care expense during retirement of approximately $320,000.  Source:  EBRI, Projected savings Medicare beneficiaries need for health expenses remained high in 2022, February 2023. 

2$3,700 average balance of HSA.  Source:  Devenir Research, 2022 year-end HSA market statistics & trends, March 2023. 

Neither Voya® nor its affiliated companies or representatives provide tax or legal advice. Please consult a tax or legal professional regarding your specific circumstances. 

Health Account Solutions, including Health Savings Accounts, Flexible Spending Accounts, Commuter Benefits, Health Reimbursement Arrangements, and COBRA Administration offered by Voya Benefits Company, LLC (in New York, doing business as Voya BC, LLC). HSA custodial services provided by Voya Institutional Trust Company. For all other products, administration services provided in part by WEX Health, Inc. 

This highlights some of the benefits of a Health Savings Account. If there is a discrepancy between this material and the plan documents, the plan documents will govern.  Subject to any applicable agreements, Voya and WEX Health, Inc. reserve the right to amend or modify the services at any time. 

The amount saved in taxes will vary depending on the amount set aside in the account, annual earnings, whether or not Social Security taxes are paid, the number of exemptions and deductions claimed, tax bracket and state and local tax regulations. Check with a tax advisor for information on whether your participation will affect tax savings. None of the information provided should be considered tax or legal advice. 

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Transcript

Speaker 1: 0:00

<silence> You are listening to the Hire Through Retire podcast, brought to you by Voya Financial. We are talking to the best and brightest in the industry to bring you the latest in benefits, savings, and investment trends in the workplace, tackling all things from 4 0 1 Ks to HSAs and everything in between. Come along with us on our journey to help all individuals become well-planned, well invested, and well protected.

Speaker 2: 0:26

Welcome back to the Hire Through Retire podcast. I am Carrie Seti and I'm so excited to be back today as a guest host for today's episode. Now that we as an industry have wrapped up another year's open enrollment period, we shift our focus on one benefit that employers are increasingly offering as an option with high deductible health plans to their employees. And that is health savings accounts or HSAs, as you'll hear me refer to them today . According to industry data, there were 104 billion in HSA assets held among 35 and a half million accounts at the end of 2022. So the interest continues to grow, but the reality is that many individuals do not fully understand all that HSAs have to offer, especially when it comes to saving for their future. At Voya, we've done a ton of research on this topic and given that many employees have enrolled in these accounts during their open enrollment, we thought we'd spend some time today talking about the power of HSA overall. I think the good news is that we've been tracking these HSA trends for years now, and we're seeing some progress with employees understanding the benefits more and more year over year . So that's a good sign. We also know that employees really like high deductible health plans and the benefits of HSA once understood, especially if you don't call them high deductible health plans . However, I think some of voya's latest research is striking in that we still have a long way to go and there's a ton of opportunity for us to continue to educate employees. So joining me for the discussion is someone who specializes in HSA specifically, and particularly when it comes to helping employers communicate their value to their workforce, and that is Matt, far a VP of Strategic Solutions Solutions for our health business at Voya. Matt, thanks so much for joining and welcome to the pod.

Speaker 3: 2:38

Hey Carrie , thanks for having me. I appreciate the opportunity and look forward to the conversation.

Speaker 2: 2:42

Great. Now, Matt, as I mentioned, we do have some research to discuss, you know, when it comes to HSA myth , but before we get going, maybe we can really just start by understanding why we're focused on this today. Could you talk a little bit more about what employees might be facing when it comes to their retirement healthcare savings gap?

Speaker 3: 3:05

Really good question, Carrie , and, and perhaps the most important question everyone should be act asking themselves. Actually, inflation isn't hitting our pocketbook just for milk and eggs. Healthcare expenses have been only going in one direction, and to give you a hint, that direction is not down. An illustrative example for all of us to keep in the back of our mind is as we age, and I just had a birthday last week, so I'm, I'm feeling older and older by the day is the average couple has an expected healthcare expense during retirement come in their way of about 320 grand, bump that up to the average balance of $3,700 of the only true vehicle out there to cover healthcare expenses in retirement IE and HSA. And look, I'm born and raised in Alabama, so no wizard mathematician here, but that's a pretty hefty gap. 316 grand to be exact. What bucket is that gap gonna be filled from? It's a bit rhetorical. That's

Speaker 2: 4:03

Crazy.

Speaker 3: 4:04

It's the participants retirement plans that's gonna be filling that gap. Early hardship withdrawals from retirement plans are significantly due as a result of unplanned medical expenses. So that retirement healthcare gap you referenced is not only real, it's also incredibly significant and large. Has the potential to really be an overall retirement game changer for the negative?

Speaker 2: 4:30

Yeah, I mean, I'll just say Matt really quickly. We, we do a ton of research with retirement transitioners and understanding, you know, how to estimate their healthcare costs in retirement is like one of the number one needs that they have. So now, you know, understanding that it's over a $300,000 gap in savings, I think it's even more alarming and I think a lot of, you know, retirement transitioners, as we would call them , might get hit with that really unexpectedly as you, as you say, that's pretty alarming to me when it comes to retirement. You know, there are a number of benefits that HSAs can offer that many individuals, right? We just talked about it. Don't think about or really consider, right? Since retirement may be too far off in that, that distant future, according to our research at Voya, just over half of Americans know that HSAs can be used for healthcare expenses in retirement. So that's 45% who don't. What are some of the benefits, Matt, that HSAs can offer specifically in retirement?

Speaker 3: 5:44

And this is a really thoughtful question that stems from a different gap, which is the education gap. There are a ton of missed facts and overlooked attributes of HSAs in the market. It's on all of us to fill that gap. Content education, thought leadership wise , and this is such an important piece of the overall health and welfare puzzle because it can reasonably argue be argued that HSAs are one of, if not the most tax advantageous vehicles out there, period, full stop . So when one a person has an HSA, they really need to know what they're enrolled in, how to leverage it, how best to use it for their individual and family needs. HSAs are triple tax advantaged. Money goes in tax free , money grows, tax free money comes out tax-free when used for qualified medical expenses. That's powerful, especially as you think back and as we referenced back to the other gap we mentioned of $316,000 that healthcare savings retirement gap. So having the ability to let your money grow now into retirement specifically for healthcare, allows participants the opportunity to limit their out-of-pocket exposure from other sources due to costly items like Medicare. Once you hit age 65, Medicare's right there , uh, kind of glaring you in the face and retirement, we've gotta think about all of the healthcare expenses will incur inclusive of Medicare premiums, which can be paid for from an HSA tax-free. So that's, that's one really good example I always like to highlight. Um, to your, to your specific question about retirement,

Speaker 2: 7:23

That's great. I mean, I know a lot about HSAs and, and I just learned something on the pods. So Matt, as we're just about out of open enrollment season and , and we do know from our own research, you know, employees wanna hear about benefits that they just signed up for all year long. Some of our other data show that only 29% of employees know that contribution levels to their HSA can be changed outside of open enrollment. So that's only three in 10 employees. As we know, as you , you called out, you know, competing financial priorities are certainly still a concern for employees, especially during this inflationary and uncertain economic environment, especially when you think about, you know, impact of things like student loan debt wanting to save for retirement. What opportunities do employees have to adjust their HSA contributions outside of the open enrollment period specifically?

Speaker 3: 8:25

This is another really important myth to overcome, especially as participants during open enrollment. Compare HSAs to other tax advantaged health accounts such as flexible spending accounts or FSAs, and there is some important nuance here as well, but unlike FSAs for example, HSAs are not spending accounts, they are basically bank accounts. They have contribution limits set forth by the IRS, but it's your account, you own it and you can contribute when and how you please one can front load the entire IRS limit, contribution limit at the beginning of the year, or you can back load it or anything in between. The one nuance we have to call out is around the payroll deduct side via an employer. It is true employers have the right operation-wise, to control aspects of their payroll process simply to ensure undue operational burden is not placed on hr. So they can't example limit payroll deduction changes to reasonable timeframes like once a week. However, participants can really change their contributions or stop them or restart them really at any time within those reasonable timeframes set forth by, by each employer OE time or open enrollment time, doesn't matter any time throughout the year, you can change your contribution. It's your account, not your employer's account. Also, it's a good time to remember participants can make post-tax contributions directly to their HSA provider at any time. Then all you've gotta do is ensure the right tax documentation is compiled for tax filing purposes at the end of the year to maximize those tax advantages. So all to say, look, participants own the account and therefore they own the contribution. There is one final important piece to, to at least touch on today, and that is I always, or we should always encourage employees and participants to check with their employer. If they offer an HSA employer contribution, otherwise known as an HSAC, they might have strategies in place, for example, that are mirror like their defined contribution match program where in order to max out that HSA employer contribution, you need to contribute each payroll versus front load or back loading your contributions. And again, it's not a rule, it's just a watch out . We all need to remember and educate ourself on when enrolling in an employer-sponsored medical plan and tying that to an HSA.

Speaker 2: 10:59

Got it. That's definitely helpful and that, that information would be really helpful for employees. On a similar topic though, Matt, one other common misconception is that employees who don't open their HSA during open enrollment have to wait until the following year with only 22% of our survey respondents noting that they can open an HSA at any time. What can you share about the ability to both open and fund an account outside of that employer's open enrollment period?

Speaker 3: 11:34

And this tracks right in line with the prior question, which is perfect. H ssas are individual accounts, period. You own them, you can open close change, you name it at any time, regardless of open enrollment, just like a bank account. Now it might make the most sense to elect an open one during open enrollment, which gets back to that education gap we mentioned earlier. But regardless, you can open an HSA or many HSAs and fund them at any time. The IRS sets the contribution limits. They do not set whether or not , uh, you open one at a specific time or not. As long as you're HSL eligible, you can open an HSA account. This is in sharp contrast to other health accounts like FSAs, which are employer owned . So if you're out there and perhaps inadvertently missed enrolling in an HSA because you've got 75,000 other decisions to make during oe, but you did enroll in an HSA qualified high deductible health plan, you should definitely take the time to research how to open an HSA and take advantage of the HSA and those tax advantages during that tax year.

Speaker 2: 12:42

Yeah, I can see a lot of employees probably confusing other accounts like a flexible spending account with an HSA, but there's such big differences and all really to benefit the employee. So thank you Matt, for all your insights here. Certainly valuable information for employees to be sharing with their workforce, and again, not just during open enrollment, but really, you know, of course as they think about year round employee communications. So, you know, tis the season. I'm gonna put a bow on all of this. If there was one thing you wanted employers to know when it comes to helping their employees understand the true value of HSAs, what would that be? Matt,

Speaker 3: 13:27

And I'll keep it short and sweet, spend the time to educate about the advantages and the differences between the various tax advantaged accounts you're offering your employees. The education gap can close the other gaps we mentioned at the top of the call. It's also the easiest gap to control via time, energy , and effort. The burden is on all of us to help close it via content. We can't afford to just assume on such important topics like this. We talked about $316,000 gap. Why make an assumption that people know exactly what they're enrolling in and what the differences and all the advantages are. We've got to spend the time to meet participants where they are at individually, financially, emotionally, and everything in between. And there are tools out there to help with that. And we should be pairing those with continuous education on tax advantaged accounts.

Speaker 2: 14:25

I love it. I I, I fully agree, Matt, and you know, I think it's great. Again, I think we've come a long way in terms of employees knowing a little bit more about HSAs, but everything you highlighted today really highlights that there's still are very big information gap . I just wanna thank you for, for really an incredible conversation around HSAs. It was such a pleasure having you here and we hope that employers can bring this intel back to their own workforce as a result.

Speaker 3: 14:57

Yeah, this was awesome. So really the thanks goes to you, Kerry . I I certainly appreciate the time and opportunity to share more

Speaker 2: 15:02

And thank you to all our listeners for your continued support. Thanks for joining us today. Stay well and happy holidays.

Speaker 1: 15:10

This information is provided by Voya for your education Only. Neither Voya nor its representatives offer tax or legal advice. Any opinions expressed within, do not necessarily reflect those of the Voya family of companies or its representatives and are not intended to provide specific advice or recommendations for any individual . Please consult your tax or legal advisor before making a tax related investment or insurance decision.