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A summary of the articles included in the December 2022 edition:
- HSAs and 401(k)s – Better Together? What Advisors Need to Know
- HSA Bank Acquires Health Savings Accounts from Inland Bank and Trust
- Maximizing Health Savings Accounts (HSAs) Tax Benefits With Adult Children Under Age 26
- HSA Contributions Grew This Year Despite Rising Prices, Tough Investment Markets
- The Ins and Outs of IRA-to-HSA Rollovers
- 48% of Millennials and Gen Z’ers Are Investing For Retirement Through This Account — and No, It’s Not a 401(k) or IRA
HSAs and 401(k)s – Better Together? What Advisors Need to Know
New survey results show that financial advisors have an opportunity to educate employers about how a health savings account can be part of a retirement plan rather than simply a spending account. More than half of large employers either currently position HSAs as part of a retirement savings strategy to employees or plan to do so in the future.
“Incorporating HSA education as part of a broader financial wellness program throughout the year with multiple touch points, perhaps alongside your retirement plan education, would go a long way toward reframing HSAs,” says Ann Brisk, director of strategic partnerships at HSA Bank. “It is encouraging to see data documenting the expansion of these valuable resources across a wide variety of employer sizes and worker populations.”
“The availability and use of HSAs continue to grow, and while there is still a lot of variability dependent on how involved in the HSA program the employer is and by organization size, some consistent trends are beginning to emerge,” according to the survey report. “Most organizations make contributions (and most do so by coverage level), but for the most part employees are still using HSAs as a spending account and employers continue to struggle with explaining HSAs to employees.”
HSA Bank Acquires Health Savings Accounts from Inland Bank and Trust
HSA Bank announced that it has acquired the health savings accounts (HSA) of Inland Bank and Trust. This acquisition offers Inland Bank and Trust’s HSA accountholders new and easy ways to manage their healthcare spending and saving through an industry-leading HSA provider with more than two decades of experience.
Under the agreement, approximately 4,800 accounts, including an estimated $15.5 million in deposits, have transitioned from Inland Bank and Trust to HSA Bank. The transaction was subject to regulatory approval and customary closing conditions.
Maximizing Health Savings Accounts (HSAs) Tax Benefits With Adult Children Under Age 26
The passage of the Affordable Care Act in 2014 introduced many changes to the healthcare landscape in the United States. One of these changes was the ability for children to remain on their parents’ health insurance plan until they reach age 26. In addition to having access to health insurance at a lower cost than they might have on their own, this measure also creates a potentially lucrative planning opportunity for young adults who can be covered by a parent’s High-Deductible Health Plan (HDHP), giving them the opportunity to contribute to their own Health Savings Account (HSA) up to the full family maximum contribution limit ($7,300 in 2022).
In return for these significant benefits, the IRS imposes certain requirements for who can contribute to an HSA: The individual must be covered by a High Deductible Health Plan (HDHP) (and have no other health coverage or be enrolled in Medicare) and they may not be claimed as a dependent on someone else’s tax return. Notably, the account owner does not have to be covered under their own healthcare plan, so a young adult who is covered under their parents’ HDHP plan (and who cannot be considered a dependent on their parents’ tax return) would potentially be eligible to contribute to their own HSA. Further, while spouses can only make combined contributions up to the family maximum contribution limit ($7,300 in 2022), non-spouses covered under the same health plan can make contributions to their own HSA up to the family limit as well!
HSA Contributions Grew This Year Despite Rising Prices, Tough Investment Markets
Though the past 10 months have been an incredibly difficult period in the financial markets, health saving accounts are alive and well. In fact, HSA contributions and withdrawals picked up significantly in the first half despite a down market, according to a midyear study by Devenir Research.
“We’d seen pretty muted growth in both HSA contributions and withdrawals during the pandemic,” said Jon Robb, Devenir’s senior vice president of research and technology. “It started to pick up a little bit at the end of 2021. But we really saw it kind of bounce back in the first half of this year. It’s a great sign seeing people engaging in these accounts.”
An HSA research leader, Devenir reported that HSA assets grew to $98.8 billion as of June 30, a 6% increase from the prior year. The number of accounts rose 9% to nearly 34 million. Account holders contributed over $26 billion and withdrew $18 billion in the first half of this year — an 11% and 12% increase from the prior year, respectively.
The Ins and Outs of IRA-to-HSA Rollovers
Savers who are focused on the wealth-building features of health savings accounts (HSAs) are often surprised to learn that they can roll funds from an individual retirement account (IRA) into their HSA, which is called a qualified HSA funding distribution. However, before practitioners start calling clients about this lesser-known rule, a word of caution — this provision is less exciting than it might sound at first, and like all things HSA-related, it can get complicated.
The most important thing to know about a qualified HSA funding distribution is that it is a once-in-a-lifetime opportunity for each HSA account holder. The second most important thing to know is that the maximum amount of the rollover is limited to the amount of that year’s HSA contribution limit.
48% of Millennials and Gen Z’ers Are Investing For Retirement Through This Account — and No, It’s Not a 401(k) or IRA
Contributing to a 401(k) or Roth IRA are common ways to start preparing for living expenses in retirement, but they aren’t the only strategic way to build a nest egg.
According to data from the Charles Schwab 2022 401(k) Participant Study, 48% of Millennials and Gen Z’ers who are offered the option to contribute to a Health Savings Account (HSA) choose to do so. This move is motivated by the desire to start saving for healthcare-related expenses in retirement.
A Fidelity Investments report estimates that a 65-year-old couple retiring in 2022 can expect to spend an average of $315,000 in healthcare and medical expenses in retirement. While this estimation accounts for the highly inflationary environment we’ve experienced, Fidelity’s findings still indicate that Americans grossly underestimate what healthcare expenses will be in retirement; the average person expects to spend just $41,000.
HSA accounts were designed to allow individuals with a high-deductible health plan (HDHP) to easily save money for medical- and health-related expenses. However, an HSA can also strategically be used to save money for retirement, in conjunction with a 401(k) or IRA account.