Employer Contributions Boost Health Savings Accounts

The amount of the employer contribution makes a difference

By Stephen Miller, CEBS Feb 2, 2015

A crucial factor in the amount of money in an employee’s health savings account (HSA) is whether his or her employer contributes to it, according to a January 2015 report by the nonprofit Employee Benefit Research Institute (EBRI).

The research findings show that:

The overall average HSA balance was $2,077 in 2014, up from $1,356 in 2008.

Accounts with an employer contribution had a higher average balance than those without one—$2,403 for those in which the employer contributed in 2014, versus $2,046 for those where the employer did not.

The amount of the employer contribution also made a difference: Workers whose employer kicked in at least $1,000 a year had an average of $2,768 in their account, versus $2,183 for those who received less than $1,000 from their employer.

The report, Maximizing Contributions to an HSA: Findings from the EBRI HSA Database, was published in the January issue of EBRI Notes.

Source: Employee Benefit Research Institute

Both individuals and employers are allowed to contribute to an HSA. Contributions are excluded from taxable income if made by the employer and deductible from taxable income if made by the employee.

Room for Growth

Commenting on the outperformance of HSAs with employer contributions compared to those funded solely by employees, Paul Fronstin, director of EBRI’s Health Research and Education Program and co-author of the report, noted that “It will be important to track this trend over time. As these accounts grow and pass the threshold for investing in riskier investments, the opportunities for both capital gains and losses will increase.”

HSA providers typically limit account investments to safe but low-yielding money market funds until a threshold amount of several thousand dollars is reached, after which employees may have the option to invest all or part of their account balance in mutual funds available under the plan, much as they do with their 401(k) accounts.

The report is based on the 2014 EBRI/Greenwald & Associates Consumer Engagement in Health Care Survey (CEHCS). Among other findings:

Overall, 15 percent of HSAs received the maximum allowable contribution. Accounts with distributions to pay health claims and with higher-level claims were more likely to have been funded with the maximum contribution, and accounts belonging to older HSA owners were more likely to have received the maximum contribution.

Individuals who had held an HSA for five years or more had, on average, $3,092 in their account, while those who had held an account for less than a year had less than $1,500 in their account. In general, account balances continued to grow over time.

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.​​

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