As the labor market becomes increasingly competitive, employers are beginning to understand the need to implement employee financial wellness programs. Such programs enhance employee satisfaction, retention, and overall productivity. According to a Bank of America study, 97% of employers feel responsible for employee financial wellness. Health Savings Accounts (HSAs) are pivotal in successful financial wellness programs.
Workplace Financial Wellness Programs
Employer-sponsored financial wellness programs give employees the authority to manage their fiscal responsibilities. These programs typically address integrated aspects of money management, such as financial education, provision of appropriate resources, and use of other planning devices and budgets.
- 71% of workers are worried about money, which lowers their productivity and overall well-being.
- 60% of employees would be more likely to remain with their current employer if they received benefits related to financial wellness as part of the total rewards offered by employers.
Employees who feel financially secure are more content in their workplaces. Financial wellness programs that equip employees with the necessary skills to manage their funds can help achieve this security. Of surveyed employees who had participated in workplace financial wellness programs, 83% felt more financially stable.
Health Savings Accounts: A Large Piece of the Puzzle
Devenir estimates that as of the end of 2023, there were about 37 million active HSAs, holding more than $123 billion in assets. That’s a year-over-year increase of about 5% for the number of accounts and 19% for assets, making HSAs one of the most popular employee benefits.
There are many advantages to having health savings accounts (HSAs) that have made them integral to employer financial wellness programs. HSAs offer a unique triple tax advantage: contributions to employer-sponsored HSAs are payroll-deducted pre-tax; earnings from interest and investing accrue untaxed; and withdrawals for qualified healthcare expenses accrue no tax or penalties. Once the account owner has reached age 65, distributions for qualified healthcare expenses remain non-taxable, and withdrawals for any other reason are taxed as income at then-current rates with no withdrawal penalties.
Despite the multiple benefits of owning an HSA, many employees who have them don’t really understand them. Some think they are the same as an FSA, with similar limitations, and make no effort to maximize the HSA’s distinct advantages.
Embedding HSAs into Financial Wellness Programs
Embedding HSAs into employer-sponsored financial wellness programs can be crucial to employee understanding. Employers have several avenues through which they can achieve this goal.
- Benefits Education: Employees need to recognize the value of HSAs and how to use them skillfully. Year-round benefits education is critical, keeping in mind that there are three types of HSA users:
- Spenders, who use up most or all of what they contribute over the year and think of their HSA primarily as a tax-saving method of covering qualified healthcare expenses
- Savers, who intentionally contribute more than they spend over the year and roll unused balances forward for future expenses
- Investors, who invest their unused HSA balance to maximize growth and often intend to use the account as an alternative retirement savings vehicle
- Spenders, who use up most or all of what they contribute over the year and think of their HSA primarily as a tax-saving method of covering qualified healthcare expenses
- Employer Contributions: Employers can stimulate employee interest in enrolling by providing “seed” contributions at the beginning of the plan year and encourage participation after enrollment by offering a percentage match for employee contributions made during the plan year.
- Targeted Health Programs: Making HSAs part of a targeted health program often increases interest in the financial wellness component. Some initiatives tie employer HSA contributions to completing activities that contribute to a healthy lifestyle, such as an annual physical or disease management program.
- Targeted Budgeting and Debt Reduction Programs: Saving for healthcare costs should be a key component of budgeting and debt reduction programs, especially given that low co-pays and minimal deductibles are no longer available through most company-sponsored health coverage.
Building a Committed, Happy, and Efficient Workforce
Employer-sponsored financial wellness programs are essential for fostering a financially secure and productive workforce. Health Savings Accounts play a crucial role in these programs by offering a tax-efficient way to save for medical expenses and build long-term financial security.