While balances in and contributions to health savings accounts are still negligible compared with 401(k) plans or individual retirement accounts, the industry is expected to evolve over the next several years in response to trends emphasizing holistic planning and financial wellness, according to a report by Cerulli Associates.
HSAs have been available to members of high-deductible health plans for more than 15 years, but despite their established presence, Cerulli said that HSAs remain underutilized in comparison to qualified retirement plans, as well as being less widely understood.
While a slight majority of participants with investible assets exceeding $2 million treat their HSA as a retirement savings vehicle, only one-third of respondents with $500,000 to $2 million do the same, the report found. Cerulli suggests that more participants in this demographic could benefit from conversations about taking a long-term view of health savings.
Cerulli said that employers’ increasing focus on financial wellness and the increased involvement of retirement providers, such as record keepers, advisers and consultants, is expanding the awareness of these benefits and framing HSAs in a longer-term, more holistic context.
More than 40% of defined-contribution plan record keepers participated in the HSA market as of 2019, up from 21% just two years prior, and Cerulli believes this trend of increased HSA involvement will continue.
“Going forward, the industry will likely feature more nuanced and targeted communications, a streamlined user experience, expanded use of investments, and a prominent role for retirement providers to provide intensive education on the topic of HSAs,” said Anastasia Krymkowski, an associate director at Cerulli.
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