Achieving Better HSA Engagement

Aligning your HSA with your 401(k) can help drive employee engagement. 

As Health Savings Accounts (HSAs) continue to soar in popularity, many plan sponsors continue to express challenges in communicating to employees about their HSAs. One trend among plan sponsors has been to align the HSA with the 401(k) — a trend that we think will continue. 

Many plan sponsors continue to offer their HSAs through the health and welfare benefit plan manager. Most of the research today in HSA success suggests aligning it with the 401(k) and considering HSA vendors that may not necessarily be aligned with the employer’s health plan, but rather with its 401(k) plan. In this article, we will review how this strategy has worked via our interview with an HSA provider, a Plan Sponsor Council of America (PSCA) member plan sponsor, and a 401(k) provider following a presentation at the PSCA’s National Conference in May. 

HSA Provider 

Optum Health representative Glen Kvadua indicated that while 58% of consumer conversations about health costs focus on the struggle of the consumer to pay medical bills, only 1% of conversations make a connection between HSAs and long-term financial security. Kvadua emphasized that if we can personalize the experience for employees, it might allow employees to better estimate their out-of-pocket expenses and better use the HSA. He stated that 83% of consumers would share their personal data online to enable a more tailored experience. 

Plan Sponsor 

At Atrium Health, which has 40,000 employees throughout North Carolina, South Carolina and Georgia, they strongly believe that HSAs provide a link between consumer-directed health plans and retirement plans. Mercedes Ikard, Director Retirement Planning for Atrium, has been focusing on an aligned HSA and 401(k) strategy since 2016. The key to communication, she believes, is to keep it simple. At Atrium, they communicate to their employees using five different methods: a micro-site, branded emails, printed materials, instructor-led classes, and Yammer (a Facebook-like site available through Microsoft). 

Atrium communicates the HSA as one of three ways an employee can save money for retirement: the 401(k) plan, the HSA and the 457(b) plan. This information is presented to employees on a single page, with links to explain the three plans. In addition, they have a graphic entitled, “401(k) vs. HSA — Where to Save?” which focuses on which retirement expenses participants might pay with their 401(k) and which ones they might pay with their HSA. 

Atrium also spends time explaining the investment features in their HSA. This includes some information on risk tolerance and balancing unexpected health care expenses against potential investment losses. They also educate about how much to invest, explaining that most people begin to invest once they have saved: 

• the deductible;
• the out-of-pocket maximum;
• a flat dollar amount; or 
• once they have met the minimum to invest.

The outcomes of explaining the investment options in the HSA have resulted from 117 “teammates” investing about $420,000 in May 2016 to 1,000 investing about $6.4 million as of the end of 2018. 

401(k) Provider 

Ken Forsythe, Head of Product Strategy at Empower Retirement, explained that Empower has recently aligned with Optum to build an integrated HSA and 401(k) strategy which will allow 401(k) participants to model 401(k) and HSA savings outcomes. Empower has developed personalized tools to help employees better plan for uncovered health care expenses and drive higher HSA savings rates. 

By integrating HSA and 401(k), it provides a more complete retirement picture by: 

1. offering a holistic view of all workplace retirement savings options (401(k), HSA, DB, Non-qualified); 
2. encouraging and facilitating immediate changes to HSA savings rates; 
3. providing recommended next steps to maximum contributions across accounts; and 
4. including claims integration with most health insurance providers. 

Empower’s Retirement Savings Optimization Model suggests that employees: 

1. Maximize their 401(k) match. 
2. Once they have contributed enough to maximize their employer 401(k) match, contribute the maximum to the HSA. 
3. After reaching the HSA maximum, return to the 401(k) to reach the maximum contribution allowed. Through using these personalized tools, Forsythe said that the increase in retirement success has improved greatly. They have seen results indicating that the outcomes for a person with an integrated retirement plan are on track to retire with income replacement at 102%, versus a 58% without a plan. 

Conclusion 

The trend in aligning your HSA with your 401(k) or other retirement plan will continue, and will help employees better understand the long-term savings an HSA can offer in helping to pay for uncovered expenses in retirement. We also see an increase in alignment between HSA providers and 401(k) providers to better communicate the HSA an additional retirement savings account. 

Karin Rettger is President of Principal Resource Group and vice-chair of the Plan Sponsor Council of America’s HSA Committee. This post originally appeared in the Summer 2019 issue of Defined Contribution Insights, PSCA’s magazine. Used with permission.