Health savings accounts still an underused source of retirement savings — PSCA

By Robert Steyer | Originally posted on Pensions & Investments

Health savings accounts remain an underused retirement savings tool, requiring more education by sponsors and a greater understanding by participants of the tax advantages to increase usage, the Plan Sponsor Council of America reported Nov. 19.

Only 18.9% of participants invested their HSA balances accounting for 25.3% of all HSA assets other than cash, the organization noted in its annual report on HSA practices and management.

From 2020 through 2023, the percentage of investing participants has ranged from 18.7% to 21.5%.

During this period, the average annual percentage of total HSA assets devoted to investments other than cash has ranged from 25.3% to 28.7%.

The report, based on responses from 532 plan sponsors, found that 65.8% of employers offered investment options in their HSAs, up from 60% in the previous year’s survey, which covered 2022 activity.

Most employers require a minimum account balance before participants can use their HSA accounts to make investments, including 46.8% requiring a minimum of $1,000 and 33.5% requiring a minimum of more than $1,000. Another 4.7% required a minimum of less than 4.7%; 15% had no minimum.

“Consumers don’t always realize the powerful tax advantages HSAs provide in supporting costly healthcare expenses,” said Ann Brisk, senior director of innovation and strategy at HSA Bank, in a news release accompanying the report. HSA Bank, a health savings account provider, sponsored the report, which covered 2023 activity.