Monthly Archives:
January 2018

How Much Should You Be Contributing to Your HSA

How Much Should You Be Contributing to Your HSA?

01/29/2018

by Jason Cook

 

How much should I deposit into my health savings account each month?

 

The short answer: The maximum prorated amount permitted by the IRS; if that’s financially viable.

 

The slightly longer answer: If you’re covered by an individual consumer directed health plan (CDHP), the IRS allows you to put as much as $3,450 per year into your health savings account (HSA). If you’re contributing to an HSA, and on a family CDHP, the maximum amount that you can contribute is $6,900 per year.  If you’re 55 or older, you can contribute an extra $1,000 annually for a total of $4,450 or $7,900 for account holders on a family plan—with catch-up contributions accepted at any time during the year in which you turn 55.

 

These HSA contribution limits are new for 2018 and just slightly higher than in 2017—$50 more for self-only coverage and $150 more for those on a family plan. (Refer to our blog post for an explanation of all of the IRS’s changes to contribution limits on health savings accounts and high-deductible health plans in 2018.)

 

HSA holders are advised to deposit the maximum amount each year because the dollars going into these accounts are tax advantaged. Contributions made to the HSA are not taxed, earnings on interest and investment gains are not taxed and distributions for qualified medical expenses, taken today, or at any point in the future, are not taxed- The triple tax advantage!  Further, balances roll over at the end of each year, can be taken from job to job, and even into retirement.  This is the portability benefit that ensures account holders are able to save long term for future medical expenses.

 

One oft-cited estimate from Fidelity: A 65-year-old couple retiring in 2017 can expect to spend an average of $275,000 on medical expenses throughout retirement. This is up from $260,000 in 2016, so one can only imagine how staggering this figure will be for those who will be retiring a few decades from now.

 

Monthly cash flow is certainly a concern for all and if you’re uncomfortable contributing the IRS annual max to your HSA through pre-tax payroll contributions, contribute the maximum amount that you are comfortable with. An often overlooked benefit that an HSA affords is the ability to contribute post tax dollars and take an above the line deduction; essentially reducing taxable income for every post tax dollar that’s contributed to the HSA.  Further, account holders have up until tax filing of the following year to make these post tax contributions for the previous year.

 

At first glance, contributing $3,450 or $6,900 to an HSA in one year may sound unimaginable.  But when taking into account the premium savings of a CDHP, compared to a traditional health plan, plus tax savings gained through contributing to an HSA, it becomes more realistic.

 

Need help determining how much you should set aside in your HSA each month to reach your retirement savings goal? WEX Health provides a free HSA Goal Calculator that will help you determine the right amount for you, taking into account your health plan coverage type, deductible amount, number of years before retirement, monthly healthcare expense and more.

 


Jason Cook WEX Health

Jason Cook

Vice President, Healthcare Emerging Market Sales, WEX Health

WEX Health is an organization with a mission to simplify the business of healthcare and healthcare payments. As part of this mission, Jason Cook is focused on health savings account (HSA) growth across all verticals and partner channels.

Are Incentives for Participating in Workplace Wellness Programs in Peril?

Are Incentives for Participating in Workplace Wellness Programs in Peril?

01/19/2018

 

The data on workplace wellness programs is in, and they’re a hit with nine out of 10 employers, who now rely on them to address challenges ranging from productivity and absenteeism to health-related costs. However, a new ruling from a federal district court in Washington, D.C., may mandate changes to these programs as early as next January.

 

As it stands now, the U.S. Equal Employment Opportunity Commission (EEOC)’s rules on employer-sponsored wellness programs allow employers to reimburse employees for up to 30 percent of their cost of health insurance as an incentive for participating in workplace wellness programs. However, in October 2016, the American Association of Retired Persons (AARP) sued the EEOC, objecting to two of its regulations and filing a motion to block them. The AARP argued that the regulations are discriminatory for financially penalizing employees who refuse to provide personal medical and genetic information.

 

Last August, U.S. District Court Judge John D. Bates called the EEOC regulations “arbitrary and capricious.” He ruled that the agency had not adequately demonstrated why workplace wellness program incentives do not violate the Americans with Disabilities Act’s requirement that any disclosure of disability-related information must be voluntary. The court directed the EEOC to amend the rules while leaving them in place. In response, the EEOC proposed waiting a minimum of three years before proposing its new rules.

 

Nevertheless, Bates amended his order last month and granted the AARP’s motion to vacate the EEOC’s current wellness regulations as of Jan. 1, 2019. According to the ruling, “Because the Court issued its summary judgment decision in August 2017, EEOC will thus have had a total of over sixteen months to come up with interim or new permanent rules by the time the vacatur takes place. The Court will also hold EEOC to its intended deadline of August 2018 for the issuance of a notice of proposed rulemaking.”

 

While the EEOC could still appeal, Dara Smith, the AARP’s lead attorney in the case, says, “Making the rules ineffective two years sooner than the agency proposed is a major victory for workers and AARP. It means two fewer years of coercive penalties imposed on employees who exercise their civil right to keep private health-related information private in the workplace.”

 

Alternatively, the American Benefits Council, a lobbying group, may “try to convince their legislative allies, like Virginia Foxx (R-NC5), to push her Preserving Employee Wellness Programs Act,” according to an op-ed on EmployeeBenefitsAdviser.org. “However, this bill is very controversial and is opposed by her constituents in both parties, largely because it expands the reach of wellness programs to include genetic testing. Consequently, Rep. Foxx may get cold feet about persevering.”

 

In the meantime, the impact of wellness programs continues to ripple across workplaces. Three-quarters of employers now offer wellness programs as a means of improving worker health, in contrast to the quarter of employers who primarily offer them because they improve ROI on healthcare costs, according to findings from the International Foundation of Employee Benefit Plans’ Workplace Wellness Trends 2017 Survey Report. These popular programs dovetail with other employer programs that address employees’ mind-body concerns, including financial wellness and mental health programs.

 

Read our blog post about how today’s workplace wellness offerings emphasize overall employee health and wellbeing.

The Secret to Maximizing HSA Account Savings in the Long Term

The Secret to Maximizing HSA Account Savings in the Long Term

 01/18/2018

 

An HSA account is an excellent savings vehicle for healthcare costs during retirement, but few people have discovered that they can maximize their account’s long-term savings potential by investing their contributions in stocks, mutual funds and other investment vehicles.

 

While only 4 percent of HSA participants leveraged investments in 2017 (per the Midyear Devenir HSA Market Survey), 16 percent of all HSA assets, or $6.8 billion, were invested last year. This represents a growth of 44 percent year over year—and an enormous untapped opportunity for account holders, investment firms and the healthcare benefits market.

 

Studies show that HSA accountholders who take advantage of investments have substantially higher account balances. As reported by the Employee Benefit Research Institute (EBRI), HSAs opened in 2016 with an active investment account ended the year with an average balance of $5,197 compared to an average of $970 in HSAs with no investment account. Over time, the savings advantage continues to multiply, as evidenced by the performance of more seasoned HSAs with an investment account. Those opened in 2005 had a 2016 end-of-year balance that averaged $31,239 compared to average balances of $7,233 in accounts without investments.

 

Want to know how to talk to your employees about HSAs and FSAs? Click here to read our blog about how to communicate the value of consumer-directed healthcare accounts.

 

To keep up with the latest news on consumer-directed healthcare, follow WEX Health on Twitter.

 

WEX Health guest blog Bill Stuart HSA Enrollee Checklist

HSA Enrollee Checklist

1/08/2018

by William Stuart

 

If you’ve enrolled in HSA-qualified medical coverage for the first time, your work is only half-done! This checklist can help ensure that you get the most out of your new coverage.

 

  1. Make sure you’re HSA-eligible. Refer to IRS Publication 969 [https://www.irs.gov/pub/irs-pdf/p969.pdf] for more information. The most common situation that makes you ineligible to open and contribute to an HSA, even when you’re enrolled in an HSA-qualified plan, is enrollment in any part of Medicare or your own or your spouse’s participation in a traditional health FSA.

 

  1. Open an HSA. If you have employer-based coverage, then your employer may send enough information directly to its chosen HSA administrator to set up the account. Be sure to check with your benefits office. You may have to complete a paper application or enroll online.

 

  1. See whether your employer offers a limited-purpose health FSA. You can remain eligible when you participate in a health FSA that reimburses dental and vision expenses only. This option may make sense if you need funds early in the year (you can spend your entire annual balance at any time) or if you want to maximize tax savings or preserve HSA balances. These are annual accounts, which means that you may forfeit unused balances. Some employers offer limited-purpose health FSAs to their employees enrolled in HSAs, while others don’t. See whether this is an option, and determine whether it makes sense for you.

 

  1. Set up payroll deductions. The best way to build your HSA balance is through regular deposits. Many people start by contributing the difference in premium between their old coverage and their new plan(s). Some who can no longer contribute to a health FSA divert those elections to their new HSA(s). In both cases, the contributions merely reroute money from one pre-tax deduction to another, so that your net paycheck doesn’t decline.

 

  1. Name a beneficiary who will inherit your balance. You may have completed this step with paper or online enrollment. Be sure you name someone. If you designate your spouse as the beneficiary, then the HSA passes intact as a tax-advantaged account to your spouse. If you name anyone else, then the account is liquidated before being passed to the beneficiary, who may incur a tax liability.

 

  1. Set up online access. Your HSA administrator offers an online portal through which you can manage your account, track deposits and withdrawals, monitor debit card activity, and manage investments (which you may begin to make after your account reaches a certain cash balance).

 

  1. Check for fees. Read your account documents, which are probably posted online. Some administrators automatically send monthly paper statements and may charge a fee for this service. You can provide your email address to receive statements electronically at no charge. You may be able to set up notifications whenever your administrator receives a deposit or you use your debit card.

 

  1. Download your HSA mobile app. You can have instant access to your account activity on your smartphone. It’s a great way to stay connected to your HSA and provides real-time information wherever you are (for example, in line at the pharmacy) and whenever you need it.

 

  1. Manage your pretax payroll contributions. You can change your contributions prospectively during the year. See your employer for details. If you need more money to reimburse an unexpected expense, then you can increase your contribution. If you have accumulated a sufficient balance and want to reduce or stop your contributions to increase your paycheck, you can do so (note this isn’t recommended as it’s tough to start again).

 

  1. Decide how you want to use your HSA. Many people use their HSAs as they did a health FSA, making regular withdrawals to fund all eligible expenses. Some consciously decide to become HSA savers, either by contributing up to the maximum allowed ($3,450 for self-only coverage and $6,900 for family coverage in 2018, plus an additional $1,000 if age 55 or older) or by not reimbursing eligible expenses immediately. It’s possible for many HSA owners, particularly those who begin in their 20s or 30s, to build a six-figure HSA balance to spend in retirement on Medicare premiums and out-of-pocket medical, dental, and vision expenses.

 

  1. Remain engaged as a consumer. You assume additional financial responsibility when you’re covered on an HSA-qualified plan. You’re spending your own money from your HSA to cover many expenses. You can preserve your funds without impacting the quality of your care if you shop for price and quality (most insurers have tools to help), ask more questions of your doctor (“Would every doctor recommend the same course of treatment, or might others suggest an alternative treatment?”) and consider the site of service (retail clinic versus Urgent care center versus emergency room) when making treatment decisions. Your job isn’t to practice medicine, but rather to apply to your medical care the same principles that you consider when you buy other complex consumer products like a mortgage, vehicle, or life-insurance policy.

 

That’s it. The list isn’t onerous. And many of these items are one-and-done activities that you don’t need to think about again. The key to success with an HSA is to understand how to use your account, both mechanically and strategically. In time, most HSA owners accumulate balances, as contributions exceed distributions. This gives them a sense of security, with less fear of a sudden high medical expense – and potentially the ability to enter retirement with additional assets.


William Stuart

William Stuart

Director of Strategy and Compliance at Benefit Strategies

William G. (Bill) Stuart is director of strategy and compliance at benefit Strategies, LLC, an independent third-party administrator located in New Hampshire. An expert on Health Savings Accounts, he is a member of the American Bankers Association HSA Council. You can check his biweekly blog at www.benstrat.com/hsagps.