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Adding HSA to Your 401(k) Advisory Practice - David Ritchie - Ryan Tiernan
- 1. B P A S P A R T N E R C O N F E R E N C E 2 0 1 6 Adding HSA to Your 401(k) Advisory Practice Ryan Tiernen VP, BPAS VEBA & HRA/HSA Services B P A S P A R T N E R C O N F E R E N C E 2 0 1 6 David Ritchie Senior HSA Consultant, Access Point HSA
- 2. 2 What is an HSA? • A tax-advantaged account for the purpose of paying for eligible medical expenses • Not employment based • Allows contributions by the employer and employee • Annual contribution limits – 2016: $3,350 individual - $6,750 family • Available only to individuals with qualifying High Deductible Health Plan (HDHP) coverage • Not available to those receiving benefits under Medicare
- 3. 3 What is a High Deductible Health Plan (HDHP)? • Minimum annual HDHP deductible: – 2016: $1,300 individual – $2,600 family • Annual HDHP out-of-pocket maximum: – 2016: $6,550 individual – $13,100 family • Cannot provide first-dollar coverage, with certain exceptions – preventive care, dental, vision, limited-use FSA
- 4. HSA Trends - Demographics • 49% of all individual HSA/HDHP enrollees were age 40 or over; 51% were under age 40 • On average, HSA account balances have grown 31% each year • Average yearly administration fee for HSA investment programs is $32 • Average employer contributions to HSAs are $886 for single coverage; $1,559 for family coverage • Average HSA accountholder saves approximately $500 in taxes annually • Nearly 25% of continuously contributing HSA account holders save most of their contributions, which will help pay for escalating health care costs in retirement
- 5. 2016 Health Savings Accounts Minimum Deductible Maximum Out-of- Pocket Contribution Limit 55+ Contribution SINGLE $1,300 $6,550 $3,350 $1,000 FAMILY $2,600 $13,100 $6,750 $1,000 Contribution Limits, Deductibles and Out-of-Pocket Expenses
- 6. HSA Product Characteristics • Must be paired with a qualified high deductible health plan (HDHP) • May pair with Limited Purpose FSA and/or HRA • Vision, dental expenses only • Employer and/or consumer may contribute to account • Contributions made by payroll deduction, check, transfer • IRS restrictions on annual contribution amount •No third party substantiation required – consumer responsible •Internal Revenue Code §213(d) expenses may be reimbursed •Funds may be withdrawn for non- qualified expenses with penalty • Funds may carry over year to year • Funds are portable • Funds may be invested and earn interest for greater savings potential Consumer Owned Contributions Distributions Account Balance
- 7. 2016 BPAS Partner Conference CDH Plan Comparisons
- 8. 1. SHRM 11/15 – Show me the Benefits 36% 2015 33% 2014 26% 2013 Employer difficulty recruiting employees at all levels: 66% Healthcare 59% Retirement 53% Financial 52% Flex Time Most important benefits for attracting talent: The Growing Value of Benefits For Investment & HR Professional Use Only Copyright © 2016 Access Point HSA LLC. All Rights Reserved.
- 9. Defined Benefit Health Care • Traditional Health Insurance (HMO) • Employer Selects Coverage Options • Growth of the FSA Flexible Spending Account Consumer Driven Health Care • Cost shift to employees via design & incentives • Employees limited choice coverage options • FSA,HRA & HSA Defined Contribution Health Care • Employer makes a fixed contribution • Employee now has increased choice in coverage and responsibility for care • FSA, HRA & HSA Progression of Consumer Responsibility For Investment & HR Professional Use Only Copyright © 2016 Access Point HSA LLC. All Rights Reserved.
- 10. Source of Funds 401k/403b Contributions Only 401k & HSA Combination Salary $65,000 $65,000 10% Employee Savings $6,500 $6,500 Employee 401k Contribution $6,500 $3,500 Employer 401k Match $1,800 $1,800 Employee HSA Contribution $0 $3,000 Employer HSA Contributions $0 $1000 Total with Average Employer HSA Contribution $8,300 $9,300 A New Contribution Model? For Investment & HR Professional Use Only Copyright © 2016 Access Point HSA LLC. All Rights Reserved.
- 11. HSA at 25% tax bracket: $245,000 401k at a 25% tax bracket = $327,000 What will the 401k balance have to be? 65 year old couple will need $245,000 to cover out of pocket healthcare expenses. $82,000 Savings of Distribution Efficiency For Investment & HR Professional Use Only Copyright © 2016 Access Point HSA LLC. All Rights Reserved.
- 12. 401(k) in Concert with HSA For Investment & HR Professional Use Only. Copyright © 2016 Access Point HSA LLC. All Rights Reserved.
- 13. Investment Capabilities Employer & Employee Support Technology & Security Can these be quantified & benchmarked? Custodial Strength Experience Save, Invest or Both HSA Provider Attributes
- 14. • TOTAL RETIREMENT SPECIALIST Increase Positive Retirement Outcomes: • SAVE THE CFO MONEY Your investment/education expertise: • DIRECT COMMITTEE IMPACT Excellent tool for participant & HCE • INSIGHT MOST ADVISERS DON’T HAVE Better information on plan health: • GAIN, RETAIN AND REPRICE Increases your total service offering: HSA & Your Practice
- 15. Access Point HSA For Investment & HR Professional Use Only Copyright © 2016 Access Point HSA LLC. All Rights Reserved.
- 16. B P A S P A R T N E R C O N F E R E N C E 2 0 1 6 BPAS PARTNER CONFERENCE 2016 #BPASPC
Editor's Notes
- Read the slide – Employers Emphasizing Benefits to Recruit Talent Vol. 60 No. 9 Amid recruiting difficulties, organizations are investing more in health care and other noncash rewards. By Jen Schramm 11/1/2015 Permissions It’s getting harder to find good talent, and that’s a problem for recruiters with open positions to fill. So how can HR land qualified workers? The answer may be benefits. Recruiting difficulty is on the rise and is likely to continue to increase as the economy gets stronger. Nearly 40 percent of HR professionals said their organizations had a hard time recruiting employees at all levels in the past 12 months, according to the results of the Society for Human Resource Management’s 2015 Strategic Benefits Survey. That’s up from 33 percent in 2014 and a significant increase from 2013, when around one-quarter reported recruiting problems. In response, organizations are turning their attention to benefits, especially to attract highly skilled and in-demand talent. In the past 12 months, a greater percentage of employers leveraged their benefits programs to recruit employees compared to previous years. At the same time, they are stepping up their investment. Half of survey respondents have increased spending on health care since 2014. About a quarter boosted their investment in wellness and preventive health, professional and career development, and financial benefits. Nearly 9 in 10 HR professionals surveyed said health care is the most important benefit to a majority of their employees. And about three-quarters of respondents anticipate that their organizations’ total health care costs will rise between plan year 2014 and plan year 2015; the average anticipated increase is 13 percent. In fact, taking control of the price of health care is one of the two top strategic goals for employers. The other is ensuring that people understand the value of their benefits. After all, benefits are critical to recruiting and retaining workers. But candidates and employees need to know what those benefits are. The good news is that HR practitioners believe they are making some progress on that front. About two-thirds of survey respondents said their organizations’ employees are “somewhat knowledgeable” about the employer-sponsored benefits available to them, and 16 percent said employees are “very knowledgeable,” a significant increase from 9 percent in 2014. Meanwhile, almost 9 in 10 respondents indicated that their communications efforts are effective. Employers may also start to look more closely at the mix of benefits they offer. Two-thirds of HR professionals thought health care would increase in importance in their efforts to recruit employees at all levels in the next three to five years. But compared with the 2014 findings, fewer believe that family-friendly and preventive health and wellness benefits will become more important. When your top candidate has more than one job offer, the package of benefits you offer might just tip the scales in your favor. That’s why HR needs to find out what’s important to the people they want to hire and show them the benefits. - See more at: http://www.shrm.org/publications/hrmagazine/editorialcontent/2015/1115/pages/1115-benefits-recruiting.aspx#sthash.2YNDdT20.dpuf
- Read the slide – This slide covers the on going shift from defined benefit (DB) style health care o a more “401(k)” style defined contribution health care system. This is taking place because much like the DB to DC shift in savings, employers are having trouble supporting the ever growing cost of care and need to begin shifting that cost and risk to the employees. This slide speaks to the evolution from DB – DC and the plans and features (HRA, FSA and HSA) as an integral part in each.
- Read the slide – Example of how a contribution model may look with the addition of the HSA or the implementation/adoption of a preexisting HSA program. In this example the same dollar amount is “invested and saved” but now allocated over two different accounts. With the addition of an employer HSA contribution (average range from $750 for an individual and $1300 for family coverage). This represents a varied way to save for retirement using two mechanisms rather than the traditional 401k only.
- Read the slide – This slide speaks to the estimated retiree out of pocket health care costs and how much money would be needed in both pre and post tax dollars to offset that cost. In a 25% tax bracket the client would need significantly more money than if they had the balance already placed in their HSA. As stated earlier and in the final slide, this presentation is not meant to be seen as tax advice.
- Read the slide – 401k/403b and other DC plans as well as HSA’s do not exist in a vacuum. The two can work in tandem and each has very impactful yet very different characteristics. Those characteristics can be seen here.
- Read the slide – Whether a retirement plan adviser or a retirement planning adviser/private wealth manager the addition of HSA strategies can add a great deal to your practice. For the reasons above the adviser who embraces HSA is in a tremendous position to differentiate him/herself from their competition.
- Read the slide – This slide speaks to several of the services offered by Access Point HSA.