Open Enrollment is the opportunity for the benefit-eligible employee to reevaluate their benefits portfolio and create a truly customized benefits package for their lifestyle and unique financial outlook. They can enroll in benefits for the first time, change current plans or coverage amounts, or choose to waive or drop coverages. These decisions can have a considerable financial impact, so it’s crucial to weigh the options wisely.
TRI-AD’s partner, Alegeus, recently released the results of its 2021 Pre-Open Enrollment Survey and 2021 HSAs and Investing Survey. The surveys jointly cover consumer preparedness for open enrollment, their knowledge of health savings accounts (HSAs), and the power of investing HSA funds. The survey results show that while 53% of consumers are actively saving for retirement and 45% consider themselves savvy investors, a striking number do not see HSAs as a means for achieving either the goal of saving for long-term healthcare expenses into retirement or investing their HSA funds for growth. Only 32% understand that HSAs can help with long-term expenses, and only 17% investing HSA funds for growth. Employees are missing the connection between HSAs and long-term savings. Employers and benefits administrators can address the knowledge gap by focusing on educational tools to help consumers take advantage of the powerful financial benefits of HSAs.
HSAs provide some of the most generous tax breaks available with triple-tax savings in most states. HSA funds are deposited pretax, grow tax-free, and are not taxed when money is withdrawn to pay for qualified medical expenses. HSAs can be a more powerful savings and growth vehicle than some retirement plans! HSA funds can also be used for non-qualified expenses after age 65. Ordinary income tax will apply to withdrawals on those funds, but the 20% tax penalty no longer applies.
- Tax-free contributions — One of the financial benefits of an HSA is that no federal taxes are withheld from HSA contributions made through payroll deductions. Every dollar contributed from a paycheck goes directly into the HSA account without being taxed. Most states do not tax HSA contributions, either. California and New Jersey currently tax HSA contributions.
- Tax-free growth — Any interest or investment earnings on the account are tax-free. Investing features of an HSA account can be an essential component of long-term financial planning to pay for qualified medical expenses into retirement. Very few states tax investment earnings.
- Tax-free withdrawals — Tax-advantaged retirement accounts like 401(k)s or IRAs levy taxes when withdrawals are made. HSA account holders can make tax-free withdrawals from their accounts to pay for qualified medical expenses.
Over 80% of HSA account holders do not have their funds invested for growth. TRI-AD’s HSA HealthSaver Account offers an investment account to save for future medical expenses and a spending account to cover current eligible healthcare costs. TRI-AD HSA account holders have access to a low-cost investment lineup, a robo-advisor, auto-sweeps to move money from the cash to the investment account, and personalized guidance to drive better financial outcomes. Account holders can quickly transfer funds from the investment portion of their account to pay for qualified medical expenses. With TRI-AD’s investment allocation tools, automatic rebalancing, and portfolio management “auto-pilot” features, account management is fast, simple, and easy!
TRI-AD provides the tools, resources, support, and technology to help consumers make good benefit decisions resulting in better financial wellness now and into the future. When used appropriately, an HSA is a powerful vehicle to build wealth and can play a key role in an overall wealth and retirement strategy.
TRI-AD and our Associates’ suggestions or recommendations shall not constitute legal advice. No content on our website can be construed as tax or legal advice and TRI-AD may not be considered your legal counsel or tax advisor. Clients are encouraged to consult with their tax advisor and/or attorney to determine their legal rights, responsibilities, and liabilities. This includes the interpretation of any statute or regulation, federal, state, or local; and/or its application to the clients’ business activities.