EBRI Notes

‘Investment Options and HSAs: Findings from the EBRI HSA Database,’ and ‘How Much Can Qualifying Longevity Annuity Contracts Improve Retirement Security?’

Aug 26, 2015 24  pages


Investment Options and HSAs: Findings from the EBRI HSA Database

  • In 2014, 6.4 percent of health savings account (HSA) owners in the EBRI HSA Database had used the investment option portion of the account.
  • Forty-seven percent of the HSAs with investments were opened between 2005 and 2008, compared with 8 percent among HSAs without investments. Among HSA owners with investments, the average age was 48.5 in 2014, compared with 43 among HSA owners without investments.
  • Individuals contributed $2,636 annually on average when they had investments and $1,224 when they did not have investments. Annual distributions for health care claims averaged $1,777 from HSAs with investments, and $1,293 from HSAs without investments.
  • End-of-year account balances averaged $10,261 among HSAs with investments, and $1,709 in HSAs without them.

How Much Can Qualifying Longevity Annuity Contracts Improve Retirement Security?

  • In recent years, the prospect of increasing individual interest in annuitizing retirement savings has been enhanced through an insurance product designed to provide monthly benefits only after a significant deferral period in retirement.
  • In 2014, one of the major constraints of using this type of product was eliminated when the U.S. Treasury Department and the Internal Revenue Service (IRS) issued final rules for creating a qualifying longevity annuity contract (QLAC).
  • This Notes article provides analysis of the ability of QLACs to provide an effective longevity hedge for Boomers and Gen Xers who are simulated to participate in an in-plan offering either through a 10-year series of laddered purchases or as a one-time purchase based on the accumulated value of employer contributions from the current employer.
  • The analysis finds that even at today’s historically low interest rates, the purchase of these products may provide a significant increase in retirement readiness for the longest-lived quartile, compared with only a small reduction for the general population. Sensitivity analysis on the QLAC premiums resulting from likely increases in future interest rates provides even more favorable results.