Employer Contributions Help Drive HSA Deposit Growth

By: Dennis Zuehlke, Compliance Manager, Ascensus.

Growth in health savings account (HSA) deposits continued at a rapid rate last year, with a 22 percent increase in assets from 2015 to 2016, according to the 2016 Year-End Devenir HSA Market Survey. HSAs now hold close to $37 billion in assets, based on data from the top 100 HSA providers that participated in the Devenir survey.

Employer Contributions & HSA Growth

The growth in HSA deposits is being driven in part by employer contributions. High-deductible health plan (HDHP) enrollees are frequently opening HSAs in part to take advantage of employer contributions. Employers initially made contributions to their employees’ HSAs as an incentive for employees to choose HDHPs over traditional medical plans. Even as HDHPs have increasingly become the only plan option for larger employers, most employers still make contributions to their employees’ HSAs. And, the percentage of employers making contributions, and the dollar amount of employer contributions continues to rise.

The 2016 Employee Benefits Research Institute (EBRI)/Greenwald & Associates Consumer Engagement in Health Care Survey found that 78 percent of HDHP enrollees reported that their employer contributed to their HSA, up from 67 percent in 2014. The survey also found that 20 percent of HDHP enrollees reported an employer HSA contribution of $2,000 or more in 2016, and 42 percent of HDHP enrollees reported an employer HSA contribution of $1,000 – $1,999 in 2016, up from 10 percent and 36 percent respectively in 2014.

The Devenir survey found that in 2016, employer contributions accounted for 26 percent and employee contributions accounted for 46 percent of all HSA contributions. Among employers making contributions, the average employer contribution was $868, and among employees making contributions, the average employee contribution was $1,786. The other 19 percent of all HSA contributions came from individuals and were made to accounts not associated with an employer. The average contribution made to these HSAs, for individuals making contributions, was $1,713, according to Devenir’s findings

Credit Unions Benefit from Offering HSAs to Members

Credit unions offering HSAs to their members are benefitting from strong HSA deposit growth, but HSA penetration in the credit union space is low, with credit unions hold less than 4 percent of all HSA assets, according to Devenir. If your credit union is not offering HSAs, opportunities abound both for your members and your credit union, as double-digit growth in both the number of HSAs and HSA deposits is expected to continue for the foreseeable future as more employers switch to HDHPs.

Learn more about this topic by listening to our recent podcast: “Not Offering HSAs? Your Credit Union is Missing a Chance to Grow

Ascensus Logo NewAscensus is the NAFCU Services Preferred Partner for IRA, Retirement Plan, and Health Savings Account (HSA) Solutions Software, Training, Documents and Consulting. To learn more about our partner, visit www.nafcu.org/Ascensus


HSAs: The Medical IRA

By: Steve Christenson, EVP, Ascensus.

When I travel around the country and speak with organizations about health savings accounts (HSAs), there is a fairly clear divide between those that see the longer-term value and those that see HSAs simply as a spending account with little value to consumers and no opportunity to cross-sell. It is the latter viewpoint that requires a respectful challenge.

Let’s start with some basic assumptions.

  • Not everyone is eligible for an HSA. When someone critiques an HSA, one of the first arguments is that it does not work for everyone. It is true that those who are receiving medical assistance or other forms of subsidized care will not likely benefit from an HSA, as they do not have money to set aside for medical expenses. But if someone is HSA-eligible and pays any level of federal income tax, that person is a strong candidate to benefit from using an HSA as a long-term savings tool.
  • Individuals automatically get an HSA when their employer offers a qualifying high deductible health plan (HDHP). Unfortunately, recent surveys show that is not true. The surveys reflect that roughly 50 percent of employers (most of which have 200 or more employees) offer a paired HSA with the HDHP. Further, the data reflects that for those employers that do offer the HSA through payroll deduction, only half of the employees take advantage of it. This means that for employees who purchase an HDHP through their employer, only one out of four actually contribute. That leaves 75 percent of employees in this category plus those who purchase individual plans on the exchanges to understand HSA benefits on their own—and then find a financial organization that offers HSAs.
  • HSAs are spending accounts. In the beginning, most of them were, but through use and education, HSAs can become a key savings tool alongside an IRA or a 401(k) plan. They evolve into a savings tool, then an investment account in a few years’ time.

The reality is that use of HDHPs by employers and insurance exchanges will continue to increase. For the employer, it is simply a matter of economics to offer affordable benefits for its employees. For the HDHP to function as a benefit, an HSA is a necessary part of the equation.

The recent NAFCU webinar, we took these topics into greater depth and provided ways to use HSAs as a key tool to increase and retain your member base. You will see the evolution of HDHPs and HSAs and how HSAs have grown in a similar fashion as IRAs.  Our webinar explains how an HSA can provide triple-tax benefits and become a long-term tool for a more secure retirement while providing benefits now. Watch it now On Demand

Ascensus Logo NewAscensus is the NAFCU Services Preferred Partner for IRA, Retirement Plan, and Health Savings Account (HSA) Solutions Software, Training, Documents and Consulting. To learn more about our partner, visit www.nafcu.org/Ascensus

The Future of HSAs

By: Steve Christenson, Executive Vice President, Ascensus.

If there is one constant in American politics, it is that with every new administration comes change. One of the first questions that I received after the election was if I think that health savings accounts (HSAs) are at risk of being negatively affected or eliminated. My answer—absolutely not. Of all the issues discussed, it was one of the few issues both sides agreed on. Let’s take a look at why.


HSAs became available in January 2004, at a time employers were actively seeking to lower health care expenses for their employees. Hence, the growth of high-deductible health plans (HDHPs) emerged. By the end of 2007, approximately 10 percent of employers offered an HDHP. The key driver clearly was economics. For early adopters, acceptance of these high deductible plans required education and support of HSAs. Learn more from an in-depth conversation with Steve in Using HSAs To Attract New Members-Part 1 podcast.

HSA Growth Continued

HSAs and the dollars invested continued to grow at an accelerate rate. At the end of 2007, there were an estimated 3 million HSAs holding approximately $3.4 billion in assets. By year-end 2012, HSAs grew to 8.2 million with $15.5 billion in assets, and year-end 2015, 16.7 million with $30.2 billion in assets. And at year-end 2015, $4.2 billion of that $30.2 billion was held in investment accounts.

In 2016, Ascensus witnessed an 18 percent growth rate in HSAs at the banks and credit unions that they support. Devenir estimates that at year-end 2016, HSA assets will reach $36 billion with $5.4 billion in investments.2 Regardless of the legislation, economics will drive employers and consumers to the most effective use of their dollars. That has been proven since the inception of HSAs and will remain so with the new administration. Steve shared his insights about challenges and opportunities facing credit unions that look to their HSA products as a benefit to retaining existing members and attracting new ones. Listen to the full conversation.

A Solid Future

For the first time in many years, consumers frequently will see health care and HSAs in the headlines in the foreseeable future. Consumers who have had HSAs and understand their benefits will continue to move HSA dollars into investments and see these as part of their retirement package. Consumers who have been shifted to an HDHP but are not educated on how to open and manage HSA will seek those answers on a larger scale than at any time before in history. Consumers of all generations will seek HSA information from sources they trust. So as a financial services organization, ask yourself if you can afford to not be that trusted source and not participate in the HSA market. Those that do will benefit from this renewed momentum.


Ascensus Logo NewAscensus is the NAFCU Services Preferred Partner for IRA, Retirement Plan, and Health Savings Account (HSA) Solutions Software, Training, Documents and Consulting. More educational resources and contact information are available at nafcu.org/Ascensus.

The HSA: An Uncovered Opportunity for Millennials (and Others Struggling to Pay Healthcare Costs)

By: James Thompson, Product Manager for Ascensus

As a millennial, I can give you a long list of reasons why I don’t think I have enough money to set aside for life’s biggest moments, especially when it comes to healthcare. In fact, most millennials will tell you that they can’t afford to save while acknowledging that they can’t afford not to save. Millennials seem to understand better than the generation before them how important it is to set aside money. It’s just that they don’t think they are capable of saving enough.

So how can millennials—or anyone struggling to save—save enough to combat healthcare costs? Well, if they are eligible, by taking advantage of the triple tax benefits of owning a health savings account (HSA): tax deduction, tax-deferred earnings, and tax-free distributions (if eligible). These tax benefits allow HSA owners to transform their previously taxable money into completely tax-free money. This is a perfectly legal way to avoid taxation on once taxable money—all the way around.

These tax benefits exist because the money in an HSA is intended to pay for medical expenses incurred by the HSA owner or the HSA owner’s dependents. But it’s not a matter of using the HSA in case you incur medical expenses; it’s a matter of using the HSA when you incur medical expenses. That’s where the tax advantages really come into play.

Consider the millennial HSA owner who becomes injured playing Frisbee golf or (insert other millennial-friendly activity here) and has to be seen by a doctor or is hospitalized. That innocent recreational activity resulting in a trip to the doctor may cost the individual hundreds, if not thousands, of dollars.

The beauty of the HSA is that before paying any medical bills ‘out-of-pocket’, the HSA owner can put that payment amount in his HSA (being careful not to exceed the annual contribution limit) and receive a tax deduction for the contribution. The tax deduction is like receiving a discount on his medical bills. For instance, someone in the 25 percent tax bracket essentially is receiving a 25 percent discount on his medical bills by contributing to, or running his money through, the HSA first.

Keep in mind that an HSA owner doesn’t have to put in the total amount of all her medical bills. Many people don’t realize that, if eligible, they can contribute as little or as much as they want to an HSA (up to the statutory limit) as they are able to or on an as-needed basis. There is no federal minimum balance requirement to maintain an HSA so making several small contributions over time may be a viable option for those who feel they cannot set aside much money at one time. For example, an individual who qualifies for the full HSA family contribution amount ($6,750 for 2016) whose medical bills total $6,000 may choose to contribute a more affordable amount, such as $200, in several deposits over time, adding up to $6,000, rather than contribute $6,000 to her HSA in one deposit. In the meantime, the longer these contributions remain in the account, the greater the potential for tax-deferred earnings.

Whenever the HSA owner is ready, he can withdraw from the HSA the amounts contributed to either reimburse himself or pay the healthcare provider directly for medical expenses. And as long as the distributed amount equals his qualified medical expenses, he will not have to pay taxes on the HSA distribution.

Millennial or not, with all of the tax advantages HSAs offer, those who are eligible to make contributions will likely find it worthwhile to build up a healthy HSA balance, as medical expenses often are inevitable, even for young, healthy individuals.

As for those HSA-eligible individuals who believe that they can’t afford an HSA, it is still worth opening one with a minimal balance and adding to it as qualified medical expenses occur. These individuals might as well take advantage of the tax breaks of the HSA (taking into consideration the contribution limit and any previously contributed amounts for the year) before handing it over to the healthcare provider. After all, paying the expense out-of-pocket when eligible for an HSA contribution is like throwing money away.

Ascensus LogoAscensus is the NAFCU Services Preferred Partner for IRA, Retirement Plan, and Health Savings Account (HSA) Solutions Software, Training, Documents and Consulting. More educational resources can be found at www.nafcu.org/ascensus.