Summary
Health savings account (HSA)-eligible health plans are an important part of the health benefits landscape, yet there is little empirical research on how HSAs are used by employees. Based on its unique database of more than 11.4 million HSAs, the Employee Benefit Research Institute (EBRI) seeks to shed light on the ways HSA accountholders contribute to, withdraw from, and invest in their HSAs. Such analyses can help not only plan sponsors but also providers and policymakers better understand strategies that can help improve utilization of HSAs and, ultimately, overall employee financial wellness.
Key findings for 2020 are that:
- Despite the COVID-19 pandemic, HSA accountholders continue to build up savings in their HSAs. The average end-of-year balance was higher than the average beginning-of-year balance, and the average balance increase was even larger when analyzing only accounts that had received either an employee or employer contribution in 2020.
- Employer contributions can play a role in fostering accountholders’ engagement with their HSAs. Accounts that received an employer contribution showed several signs of optimal usage, including higher total contributions and greater likelihood of investments other than cash. However, EBRI’s analysis also reveals that these accountholders were more likely to take a distribution and, when they did, took larger distributions than accountholders who did not receive an employer contribution.
- The average HSA had a distribution. More than half of HSAs experienced a distribution in 2020. However, most accountholders who did take distributions from their HSAs withdrew small amounts.
- Few HSAs are invested. Along with the lack of a “use-it-or-lose-it” provision, one of the largest differentiators of HSAs from flexible savings accounts is the ability to invest assets within the account. However, relatively few accountholders took advantage of this ability, and those who did tended to have very large average balances.
- Age and tenure play a major role in HSA utilization. Older accountholders tended to have higher average contributions than younger accountholders and higher average balances as well. Similarly, accountholders who have had their HSAs for a longer period of time tended to have higher average contributions, higher average balances, and invested their balances in assets other than cash more frequently.