Your company probably spent a great deal of time and effort choosing the right mix of benefits to offer your employees. In return for that time and effort (and the money the company will spend on premiums and other administrative costs), you as the employer are probably expecting to receive cost savings, higher retention, and more effective recruitment, as well as healthier, happier and more engaged employees. As you should. But in order for you to get that return on your benefits’ investment, you need as many employees to participate in said benefits as possible.
In this post we’ll discuss how to get as many eligible employees to adopt (i.e enrolled in) your HSA, as well as how to keep them engaged with the benefit. It comes down to: letting them know how to become eligible for an HSA, the benefits of signing up for one, depositing employer contributions into employees’ accounts, and ensuring they have the option to invest their money.
Let’s get started.
1. Explain eligibility criteria
Even if this isn’t the first time you’re offering an HSA to your employees, they might not know how to qualify to participate. So before, during, and after open enrollment, you want to make sure you communicate the basics. Anyone who meets the requirements to participate in company benefits, can participate in an HSA as long as they also meet these eligibility requirements:
- They are actively enrolled in a High Deductible Health Plan (HDHP) and it’s their only health insurance coverage.
- They can’t be considered a dependent on someone else’s tax returns.
- They're 18 or older and not enrolled in Medicare (Part A and Part B) or Medicaid.
- They don’t have or use a General Purpose FSA (Flexible Spending Account). But, employees are allowed to have a Limited Purpose FSA for dental, vision, or a Dependent Care FSA. Note: An employee can have an existing HSA and open an FSA. Their HSA funds will remain, but they cannot continue contributing to the health savings account.
You’ll also want to be sure to communicate that even if their spouse or dependents aren’t covered by the employer-sponsored HDHP, the employee can still use their HSA contributions to pay for qualified medical expenses for these family members. Their only limited in how much they can contribute annually by the type of HDHP they have, which are determined by the IRS and adjusted annually for inflation.
Sometimes the only hurdle employees have to signing up for a new benefit is knowing that they can. By clearly explaining the eligibility requirements during open enrollment, you can increase your employees’ adoption of your HSA with minimal effort.
2. Discuss the main advantages
Another way to increase employees’ adoption of and engagement with your HSA, is to make sure they’re clear on the benefits of participating in this type of account. You should develop communication collateral that both hits the high points and separate pieces that dig deep into the benefits of each attribute HSAs have.
To keep your employees engaged with their HSA throughout the year, you’ll want to regularly release seasonally appropriate communication collateral that reminds employees of how their HSA can help meet their current medical expense needs.
Here are some of the benefits you should highlight:
- HSAs rollover from year-to-year. Unlike other medical spending accounts, employees own their HSAs and all of the contributions made to them (including their employer’s contributions). Because of this, their account balance rolls over from year-to-year, enabling them to build a health safety net for that medical rainy day we all inevitably have.
- HSAs are portable. Another way account ownership benefits employees is that they never lose access to their HSA– even if they leave the company. Also, if they cease to be covered by an HDHP, they can still use their previously contributed money on qualified medical expenses.
- HSAs come with a triple tax advantage. The money employees contribute is tax-free the year it’s made, it grows tax-free and distributions that are made for qualified medical expenses are tax-free as well. That means employees could end up saving up to 37% on their out-of-pocket medical costs, depending on their tax bracket.
- HSAs can act as a supplemental retirement savings account. Since HSAs rollover from year-to-year, employees have the chance to build their savings over time. Once they turn 65, their account starts to act like a typical retirement account except for one caveat: distributions for qualified medical expenses remain tax-free. All other expenses are taxed at the appropriate income tax rate. Since the average 65 year-old couple retiring today can expect to pay more than $400,000 in healthcare costs in retirement (which doesn’t include long-term care, which could be as much as $100,000 a year), a retirement account that enables tax-free medical spending would be a very helpful asset.
- They have the ability to invest their HSA contributions. Some HSA administrators allow participants to invest a portion or all of their contributions. This allows their money to grow at the rate of the market.
- Under an HDHP, preventative care is covered 100% prior to the deductible being met. This could help alleviate any hesitation employees feel with signing up for a high deductible plan.
If you need help answering employees questions about the benefits of HSAs and the basics of how they work, Lively has compiled the top HSA questions and their answers, so you can easily have information at your fingertips.
3. Make employer contributions
The more employees contribute to their HSAs, the more engaged they become and the more money you save on FICA taxes. So if you really want to encourage employees to keep contributing to their account and to contribute more, consider implementing employer contributions.
According to Devenir’s most recent HSA report, 33% of all HSA accounts received employer contributions. The average employer contribution was $869 and the average employee contribution was $2,147. If only 33% of accounts received employer contributions, there’s still room in the employment market to stand out by being an employer that offers this. By contributing to employees’ accounts, you not only show current and prospective employees that you care about their health and wellbeing (which can help improve retention and recruitment efforts), you also help remove some of the burden of paying for the high deductible, which could encourage them to sign up for this plan option.
4. Enable investment of HSA contributions
If you want to encourage employees to contribute more to their HSA and to stay engaged with their account, offering an HSA investment account is a good way to do this. It also helps to ensure they grow their money faster. According to Devenir’s 2023 midyear HSA report, the average total balance of an investment HSA was $16,397 in January 2023, which was 6.7x larger than the average non-investment account balance. The more success employees see they’re having in growing their medical safety net, the more they’re likely to stay engaged with it.
At Lively, we've seen that an easy-to-use platform, outstanding support, and built-in account holder education can boost engagement and help employees maximize their HSAs. In fact, in our 2023 HSA Snapshot Report, we found that Lively HSA account holders invest at two times the industry average and retain nearly $300 more a year than the average account holder.
How Lively can help
Lively is your partner in ensuring your benefits strategy is successful. We offer a best-in-class product that is easy to use and understand, and makes it easy for employees to invest their savings. That partially why Lively HSA account holders save more and invest at double the industry average. We take care of employee onboarding and education and serve our plan participants and clients with diligent customer service. If you’re ready to level-up your benefits package, reach out today.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.