Benefits Buzz

Future Looks Bright for HSAs

Posted on March 12th, 2019

Health Savings Accounts (HSAs) have seen tremendous growth in the past decade and are quickly becoming one of the most popular employee benefits. These accounts allow individuals who are enrolled in a Qualified High Deductible Health Plan to use tax-free dollars to pay for out-of-pocket healthcare expenses for themselves and their families.

A new study from Devenir, highlights HSA growth in 2018 and predicts continued growth this year. The 2018 Year-End HSA Research Report was based on a survey of top 100 HSA providers and included data for the period ending December 31st 2018. Here are some of the key findings:

HSA accounts exceed 25 million.

According to the study, the number of HSA accounts has surpassed 25 million, holding $53.8 billion in assets. This represents a year-over-year increase of 13% for accounts and 19% for HSA assets.

HSA investment assets surpass the $10 billion mark.

Devenir estimates that HSA investment assets reached $10.2 billion at the end of December, up 23% year-over-year. The average total balance, including both the deposit and investment accounts, was $14,617.  19% of all HSA assets are in investments.

Fewer unfunded accounts.

The study found that 16% of HSAs were unfunded at the end of 2018, compared to 20% at the same time in 2017.

HSA contribution jump.

According to Devenir, HSA account holders contributed almost $33.7 billion to their accounts is 2018, up 22% from the year before. Of these contributions, 26% were from employers. The average employer contribution was $839, which is up for $604 in 2017. 57% of all HSA dollars contributed to an account came from the employee with an average contribution of $1,872. A further 13% of contributions came from an individual account not associated with an employer, with an average of $1,723.

The future is bright.

Devenir currently projects that the HSA market will approach $75 billion in HSA assets by the end of 2020, held among roughly 30 million accounts.

Why are HSAs so popular?

Initially created in 2004, HSAs were slow to take off, but their popularity has skyrocketed in recent years. One key factor that makes HSAs so attractive is the triple tax advantage. Contributions go into the account tax-free, any interested and investment income earned on the account is tax-free, and withdrawals made from the account for eligible medical expenses are tax-free as well. HSA funds can be used to cover a wide range of eligible expenses, not just those associated with the health plan.

HSAs have many other benefits that make them so popular, including the fact that the account is individually owned. There is no forfeiture of funds at the end of the plan year, of if the account holder retires or leaves the company. Additionally, after age 65, HSA funds can be used for any expense without penalty, though withdrawals are taxed if not used for healthcare expense. Because of this, HSAs are also gaining popularity as a vehicle to pay for healthcare expenses in retirement.

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