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A summary of the articles included in the December 2023 edition:
- More Employers Positioning HSAs as a Retirement Savings Strategy: PSCA
- Health Savings Accounts: From Simple Savings To Investment Powerhouse
- How One Millionaire Uses a Health Savings Account to Build Wealth
- This Underutilized HSA Perk Can Supercharge Your Savings
- First Dollar Earns IRS Approval as Nonbank Trustee
- DataPath Granted Non-Bank HSA Custodian Status
More Employers Positioning HSAs as a Retirement Savings Strategy: PSCA
The Plan Sponsor Council of America’s (PSCA) 5th annual HSA Survey of more than 500 employers indicates that more employers are framing HSAs as part of a holistic retirement savings approach and not just a spending account for current health care expenses.
In fact, the 2023 HSA survey reveals that 4 in 10 employer respondents indicated that they position the HSA as part of a retirement savings strategy to employees, up by nearly half from two years ago, when the level was at 27%. Note that the findings are based on the 2022 plan year experience.
Health Savings Accounts: From Simple Savings To Investment Powerhouse
Once just a vehicle for immediate health care costs, health savings accounts, or HSAs, have transformed into a potent financial tool. Many investors are leveraging their HSA’s triple-tax benefits for long-term health and retirement planning.
Nearly two decades ago, President George W. Bush signed into law the Medicare Prescription Drug, Improvement, and Modernization Act, a law that created HSAs. Back then, the Bush administration said the HSA was designed to provide a tax-advantaged way for individuals to save and pay for current health care costs as well as those in retirement.
Today, we know that “saving and investing in an HSA can play a critical role in addressing both current and long-term medical expenses,” said Karen Volo, head of health and benefit accounts at Fidelity.
How One Millionaire Uses a Health Savings Account to Build Wealth
Brennan Schlagbaum has a simple approach to investing — he puts most of his money in three index funds — but he does have a lot of accounts to juggle.
The 31 year old, who paid off more than $300,000 worth of debt with his wife Erin before building a net worth of nearly $2 million, has his investments spread across seven different types of accounts. Of all of his accounts, “my HSA is my favorite by far,” said Schlagbaum, who quit his CPA job in 2021 to focus on his financial education business Budgetdog full-time.
The Schlagbaums happen to have a lot of medical expenses currently, as their daughter was diagnosed with Dravet syndrome in 2022.
“Her medical bills have totaled quite a bit,” said Schlagbaum. “In 2022, they were $200,000. Of course, insurance does cover a lot of that.” But for whatever out-of-pocket expenses they’re on the hook for, “we have the ability to pull that money tax-free at any point in the future. It gives us a lot of flexibility down the road.”
This Underutilized HSA Perk Can Supercharge Your Savings
If you have a health savings account (HSA), chances are you’re missing out on its full potential.
The vast majority of Americans with HSAs aren’t investing their contributions, according to recent research — and are thereby leaving a sizable amount of money on the table.
About 36 million Americans have HSAs, which are tax-advantaged accounts available to those enrolled in high-deductible health plans. The funds must be used on certain medical or dental expenses including deductibles, copays, over-the-counter drugs and menstrual products.
HSAs have a slew of tax benefits: Contributions are tax deductible, qualifying withdrawals aren’t taxed and neither are any earnings on the savings. (If you have an HSA, you probably already heard this much in the pitch from your HR department.)
However, there’s another largely underutilized HSA perk. In most cases, your contributions can be invested in mutual funds, brokerage accounts or certificates of deposit to supercharge your earnings.
First Dollar Earns IRS Approval as Nonbank Trustee
First Dollar announced its approval by the Internal Revenue Service as a passive nonbank trustee for health savings accounts. This designation broadens First Dollar’s capacity to provide partners with greater flexibility and more robust compliance capabilities for HSAs.
“Our commitment to compliance and our earned trust has made this achievement possible,” said Jason Bornhorst, CEO and co-founder at First Dollar. “We’re excited to serve our partners in our expanded capacity as a nonbank trustee.”
DataPath Granted Non-Bank HSA Custodian Status
DataPath Financial Services (DFS) announced its approval by the Internal Revenue Service (IRS) as a Non-Bank Custodian for Health Savings Accounts (HSAs) effective November 1, 2023.
DFS can now provide more expansive capacity to its HSA client partners, including powerful efficiencies in both compliance and flexibility.
“Having debuted our HSA administration platform in 2004, DataPath already offered perhaps the most proven system on the market,” said John Robbins, Jr., DataPath’s president and chief executive officer. “This decision by the IRS proves that we have the experience and scope to serve just about any plan administrator or financial institution,” he said.