Inspira Financial’s study reveals increased contributions among workers with both HSAs and LPFSAs

The report suggests that workers could do more to take full advantage of these accounts

Oak Brook, Ill. — (Sept. 10, 2024) — Inspira Financial, a leading provider of health, wealth, retirement, and benefits solutions, today released a first-of-its kind study that examines the behavior of individuals who own both a health savings account (HSA) and a limited purpose flexible spending account (LPFSA). The key finding shows that employees with both an HSA and an LPFSA contribute more to their HSAs compared to those who only have an HSA. But based on distribution activity, workers are not fully taking advantage of these accounts and their tax saving benefits.

Inspira partnered with Employee Benefit Research Institute (EBRI) to examine its databases of nearly 300,000 HSA and FSA accountholders and to understand behaviors around the usage of HSAs and LPFSAs.

“There’s a clear message here: HSAs and LPFSAs can help workers realize tax savings, stretch health care dollars further than they otherwise could, and be better prepared for health care in retirement — but only when they are used together strategically,” said Michael Eldredge, HSA Product Manager at Inspira. “We see an opportunity for employers to better position their employees for short- and long-term health care spending and saving success by pairing an LPFSA with an HSA and putting an education plan in place so employees know how these benefits can work together.”

The study shows accountholders who have both LPFSAs and HSAs are more actively engaged with their workplace benefits compared to those without LPFSAs. Regardless of the reason for their higher engagement, these workers are well-positioned to maximize tax savings.

However, contributions do not tell the entire story. Approximately 30% of employees with access to both an LPFSA and an HSA do not withdraw any funds from their LPFSA. The lack of distributions is concerning, as it could mean that these accountholders aren't getting the full benefits of their company's LPFSA. The report further breaks down this trend while offering suggestions for employers to take action.

“One approach that organizations can take is to suggest that workers can avoid withdrawing money, for dental and vision expenses, from their HSAs by participating in their employer’s LPFSA offering. Although employees with an HSA cannot also have a health care FSA, they can still open an LPFSA if it's available through their employer," Eldredge said.