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A summary of the articles included in the October 2024 edition:
- Devenir Report Finds HSA Market Surges to $137 Billion, Propelled by Investment Growth
- Sponsor May Let Employees Flex Their Benefits Under New IRS Ruling
- New Research Findings Reveal Employers Who Contribute to HSAs See Double-Digit Growth in Employee Participation
- The Tax Code Will Be Rewritten in 2025. How Will HSAs Fare?
- HSA Providers Making Progress on Investment Options, But…
- Does Your Spouse’s Enrollment in Medicare Disqualify You?
Devenir Report Finds HSA Market Surges to $137 Billion, Propelled by Investment Growth
Devenir, a national leader in providing investment solutions for Health Savings Accounts (HSAs), released today the results of its 28th semi-annual Health Savings Account survey and resulting research report. Devenir found that there was about $137 billion saved in almost 38 million HSAs at the midyear point of 2024.
Key Findings:
- Strong Asset Growth. Supported by stock market tailwinds, HSA assets saw continued strong growth during the first half of 2024. Growth in the number of HSAs continued. At the midyear point of 2024, there were $137 billion in HSA assets held in almost 38 million accounts, a year-over-year increase of 18% for assets and 5% for accounts.
- Rapid Growth in HSA Investment Assets. HSA investment assets saw continued rapid growth, driven by significant market returns during the first half of the year and increased recognition of HSAs’ long-term potential. During the first half of 2024, HSA investment assets grew 21%, totaling $56 billion at the midyear point.
- Increase in HSA Accounts Investing. The number of HSAs investing continued to grow. About 3.2 million HSAs, representing almost 9% of all accounts, had at least a portion of their HSA dollars invested.
- Slowing Withdrawal Activity. Account holders contributed $31 billion to their accounts in the first half of 2024 (up 6% from the year prior) and withdrew $20 billion from their accounts during the same period (down 2% from the year prior).
Sponsor May Let Employees Flex Their Benefits Under New IRS Ruling
A recent IRS private letter ruling (PLR) paves the way for a 401(k) plan sponsor to give employees flexibility to allocate an employer nonelective contribution among other tax-favored benefit options. These alternatives include employees’ health savings accounts (HSAs), retiree health reimbursement arrangements (HRAs) and educational assistance benefits. However, employees can’t receive the contribution in cash or as another taxable benefit. Only the recipient of a PLR can rely on it, so employers interested in exploring a similar design may want to seek their own IRS ruling to mitigate risk. That said, because PLRs provide insight into how IRS would analyze similar plan designs, some employers may decide to proceed without obtaining their own ruling.
New Research Findings Reveal Employers Who Contribute to HSAs See Double-Digit Growth in Employee Participation
HealthEquity released research findings on how Health Savings Account (HSA) contribution strategies influence how employees participate in their HSA benefits. The qualitative and quantitative analysis included a sample of nearly 2,000 HealthEquity clients and more than 2 million HSA members. The analysis provides insight for employers who want to create impactful HSA benefit strategies that support their employees’ financial wellbeing.
“Benefit leaders want employees to get the most out of their benefits — including HSAs — and fostering utilization is a constant challenge,” said Amanda Riley, head of enterprise client relationships at HealthEquity. “What we find is that a deliberate employer HSA contribution strategy increases participation, and by extension, more healthcare savings.”
The Tax Code Will Be Rewritten in 2025. How Will HSAs Fare?
The stakes are high for all programs tied to the federal tax code. Including Health Savings Accounts.
We don’t know which major political party will control the presidency, the Senate, and the House of Representatives beginning in January 2025. We know that we’ll have a new president, but little else. We don’t know the new president’s and each congressional chamber’s ruling party’s legislative priorities until they are seated and begin to act.
What we do know is that much of the federal tax code expires in 2025. Congress and the new president must act before the end of next year to maintain functional tax policy. Their decisions will probably guide the nation for the next decade – the span that any new tax policy typically is effective. In the process, their priorities will create opportunities and threats for many tax-related programs ranging from mortgage interest to deductibility of state and local taxes to expensing capital equipment and paying out-of-pocket financial responsibility for medical services with pre-tax dollars.
Let’s look specifically at Health Savings Accounts and the opportunity during the next 15 months to help more consumers manage their growing out-of-pocket health-related expenses.
HSA Providers Making Progress on Investment Options, But…
Morningstar’s 8th annual study on the health savings account (HSA) industry finds that the leading providers continue to make progress, but there’s still plenty of room for improvement.
In addition to assessing the HSA industry overall, the study evaluates 11 of the top HSA providers with respect to: 1) investment accounts to save for future medical expenses, and 2) spending accounts to cover current medical costs.
Overall, the study found meaningful improvements in HSA features, such as lower fees and better investment options. However, Morningstar suggests there is substantial room for growth in the industry, with just four providers receiving an “above average” or better rating on both use cases.
Does Your Spouse’s Enrollment in Medicare Disqualify You?
Question: I cover my husband and myself on a family policy through my employer. My husband is also enrolled in Medicare (I’m not). Does his being enrolled in Medicare disqualify me from contributing or receiving an employer contribution to my Health Savings Account?
Answer: No. Health Savings Account eligibility is determined person-by-person. In assessing your eligibility to open and fund a Health Savings Account, what’s relevant is your coverage and any disqualifying factors that apply to you. You’re not entitled to receive benefits from his Medicare coverage because Medicare issues only individual policies. Therefore, you don’t lose the opportunity to open and fund an account because a family member isn’t HSA-eligible.
Think about it this way: Imagine you and your two young children are enrolled on your coverage. You don’t question whether you can contribute to a Health Savings Account when you cover two family members who aren’t HSA-eligible because they qualify as your tax dependents. The same principle holds true regardless of the age of the family member or the disqualifying coverage or event. Your Health Savings Account eligibility is based solely on your coverage and your meeting all other eligibility requirements.