has an important message for employees who will soon
start signing up for next yearís health benefits: Take
a close look at any health savings accounts you are
considering enrolling in.
analyst Leo Acheson, in a new report, examines 10 major
HSAs that are popular in the workplace, and his
conclusion is anything but glowing.
is much room for improvement across the industry,"
he concluded. Of all the plans he examined, Acheson
identified only one as a "compelling" way for
people to set aside money to cover health expenses: The
are savings accounts that allow you to set money aside
ó often by having a pretax sum deducted from each
paycheck ó to pay for doctors, blood tests, hospitals
and other out-of-pocket medical expenses. The money can
be used in the short term or stashed away for decades,
ultimately helping out with retirement health care
expenses if not used sooner.
if youíre using an HSA to stash away money for the
future, the investment choices you are offered matter,
and so do the fees you pay. When Morningstar evaluated
major HSA plans, it found only four that it could rank
positively based on the fund choices offered, the
managers who invest the funds and low fees. Bank of
America, HealthEquit, Optum and The HSA Authority all
made the cut.
a more limited assessment of quality funds, Morningstar
ranked Bank of America, BenefitWallet, HealthEquity,
Health Savings Administrators, Optum and The HSA
Authority ahead of competitors.
calculation is different if youíre not worried about
building up a long-term stash and instead plan to use
the HSA strictly for covering near-term medical bills.
Investments choices arenít as essential if youíre
planning to spend the money in the HSA in the short
term. Rather, the important consideration when saving
money that will be used in the short term is whether the
HSA offers a checking account that doesnít charge
monthly maintenance fees. In that regard, Morningstar
ranked only Alliant Credit Union, SelectAccount and The
HSA Authority positively.
for both saving for the short term and investing for the
future, The HSA Authority is the only standout,
according to Morningstar.
course, before scrutinizing the HSA plan your employer
offers, make sure such an account makes sense for you in
the first place.
are best for young, healthy employees who rarely go to a
doctor; not people with a lot of health expenses. Thatís
because the HSA usually comes packaged with a
high-deductible health insurance plan.
some employers are becoming more generous with
retirement savings plans
youíre on a high-deductible health insurance plan, youíll
initially pay many of your health care costs out of
pocket. The insurer wonít start paying your doctor and
hospital bills until after youíve spent a lot ó at
least $1,300 if you are single or $2,600 for a family.
And even after reaching those sums, you can encounter
big costs such as covering copayments.
paying those types of sums out of pocket would be
unmanageable, the high deductible insurance policy
probably isnít for you. To calculate whether a high
deductible insurance plan or another option offered by
your employer makes more sense financially, try a
calculator such as https://www.calcxml.com/calculators/ins11.
the HSA/high deductible insurance combination sounds
like it could work for you, there are some solid reasons
to start using it as a savings vehicle.
an HSA can be an excellent way to enhance your
retirement funds. Putting as much as possible into a
401(k) is important because it can go toward paying for
all sorts of retirement needs, including food, housing
and health expenses. But since many people canít save
enough in 401(k)s or IRAs to adequately cover their
retirement, an HSA can be an extra help. It can help pay
for your health care costs in retirement, which can
total a hefty sum. Fidelity has estimated a 65-year-old
couple should expect to pay $260,000 for health care in
retirement. HSA savings can be used tax-free to pay for
Medicare premiums and long-term care insurance. After
age 65, an HSA can also be used for other expenses, but
if you spend on something other than health care the
money will be taxed like income.
the other hand, an advantage of HSAs is the tax
treatment they are given; Uncle Sam gives you a break on
taxes when you save in an HSA. Money you put into the
account isnít taxed, money that stays in the account
isnít taxed and money you take out to pay for medical
costs isnít taxed. Thatís a good deal. Because you
arenít taxed, every penny you save will count a lot
more than if it was sitting in a regular savings
can save as much as $3,400 in an HSA annually; a person
with a family could stash away as much as $6,750, and if
you are 55 or over you can add another $1,000.