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Are HSAs the next 401K?

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Presentation by Sarah Pew, Managing Director, Corporate Strategy, Softheon at the Smart Health Conference 2018, held at Bally's Las Vegas on the 26-27th of April, 2018.

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Are HSAs the next 401K?

  1. 1. © 2018 Softheon, Inc. and/or its affiliates. All rights reserved. Softheon is a registered trademark of Softheon, Inc. or its affiliates. This publication may not be reproduced or distributed in any form without Softheon's prior written permission. The information contained in this publication has been obtained from sources believed to be reliable. Softheon disclaims all warranties as to the accuracy, completeness or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the opinions of Softheon's research organization and should not be construed as statements of fact. The opinions expressed herein are subject to change without notice. Although Softheon research may include a discussion of related legal issues, Softheon does not provide legal advice or services and its research should not be construed or used as such. Are HSAs the next 401K? Thursday, April 26, 2018
  2. 2. Copyright 2018. Confidential and proprietary information. Presenter While earning her MBA at Stony Brook University with a focus on Healthcare, Sarah began interning at Softheon. She has worked with all areas of the company and has done almost everything from stuffing envelopes her first week as an intern, to leading the operations, to currently acting as the Managing Director of Corporate Strategy. In this role, Sarah is consistently taking stock of the Softheon product, people, culture, and market to ensure alignment. At her core, Sarah is a problem solver. She has spent her career in a variety of roles with one common factor; something is broken, and she wants to fix it. Most recently, Sarah has taken her passion of problem- solving into the realm of healthcare. 2
  3. 3. Copyright 2018. Confidential and proprietary information. HSA vs 401K :: Similarities • Deductible contributions (if eligible) • Money grows tax deferred • Penalty tax applies to inappropriate withdrawals • Can be matched 3 Source: AHIP & GTM Results LLC
  4. 4. Copyright 2018. Confidential and proprietary information. HSA vs 401K :: Differences • HSA funds can be used at any age for qualified medical purchases • HSA penalty tax disappears at age 65; 401K at age 59.5 • HSA penalty tax is 20%; 401K is 10% • HSA funders must have an HDHP • HSA has no required minimum distributions 4 Source: AHIP & GTM Results LLC
  5. 5. Copyright 2018. Confidential and proprietary information.5 Source: Aureon Source: Fidelity 401K Results HSA Results Shift from “Defined Benefit” to “Consumer-Directed” Consumer survey :: 401K vs HSA
  6. 6. Copyright 2018. Confidential and proprietary information. Audience poll :: Did you know? 6 Source: Fidelity Take a guess?
  7. 7. Copyright 2018. Confidential and proprietary information. Healthcare costs :: 2002 vs 2017 7 Source: Fidelity
  8. 8. Copyright 2018. Confidential and proprietary information. Knowledge is power :: Stats 8 Source: Fidelity
  9. 9. Copyright 2018. Confidential and proprietary information. Knowledge is power :: Rollover 9 Source: Softheon data -2000 0 2000 4000 6000 8000 10000 12000 0 1 2 3 4 Savings over 4 Years Contribution Expenditure Total Over $11,000 savings in 4 years! 37% didn’t know they keep any unspent money in an HSA from one year to the next.
  10. 10. Copyright 2018. Confidential and proprietary information. Knowledge is Power :: Investment 10 Source: The HSA Reporcard 46% didn’t know they can invest the balance in mutual funds.
  11. 11. Copyright 2018. Confidential and proprietary information. Knowledge is power :: No penalties after 65 11 Savings + Investment = Retirement Fund after age 65 51% didn’t know HSA money can be used for general expenses after age 65, though income taxes apply.
  12. 12. Copyright 2018. Confidential and proprietary information. Knowledge is power :: Triple Tax Advantage 12 33% didn’t know the money they put in an HSA goes in tax free, grows tax free, and comes out tax free as longa as it is used for qualified medical expenses.
  13. 13. Copyright 2018. Confidential and proprietary information. 40% of Americans have an HDHP…HSA??? 13 • Disjointed enrollment • Not co-branded • No investment options • No tracking Source: Devenir Source: CDC Enrolled in HSA 38% Not Enrolled in HSA 62% HDHP ENROLLEES
  14. 14. Copyright 2018. Confidential and proprietary information. Where do we go from here? 14
  15. 15. Copyright 2018. Confidential and proprietary information. References & resources • https://www.planadviser.com/couple-retiring-year-will-need-280k-health-care/ • https://blog.healthequity.com/healthcare-reform-legislation-can-new-legislation-make-hsas-the-new-401k • www.ahip.org/2016-survey-of-health-savings-account-high-deductible-health-plans/ • www.beckershospitalreview.com/payer-issues/cdc-nearly-40-of-us-adults-have-high-deductible-health-plans.html • www.beckershospitalreview.com/finance/21-statistics-on-high-deductible-health-plans.html • www.insurancejournal.com/news/national/2017/11/29/472510.htm • health.usnews.com/health-care/articles/2017-09-15/nearly-25-million-us-workers-now-have-high-deductible-health- plans • www.devenir.com/wp-content/uploads/2017-Year-End-Devenir-HSA-Market-Research-Report-Executive-Summary.pdf • sponsor.fidelity.com/bin-public/06_PSW_Website/documents/3_surprising_truths_about_HSAs.pdf • https://thehsareportcard.com/the-top-10-investor-hsas/ 16

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