One thing we at Silberman Group like to do for our clients is help them work through the best strategy for contributing to healthcare premiums. A part of that is considering how much, if any, the employer will contribute to employee’s health savings accounts. HSAs are a wonderful tool to help employees mitigate some of the costs associated with healthcare.
The dilemma we often see is getting employees to recognize the benefits of HSAs and being willing to contribute to those accounts. There is still some confusion between FSAs (Flexible Savings Accounts) and HSAs. We have employees ask what will happen to their HSA money when they leave their employer. Some employees think they will lose HSA money like they lose FSA money. We remind these employees that this is their money, the same as any other bank account.
The second hurdle employers face is encouraging employees to contribute enough funds to their HSA account. HSAs can be very beneficial, but only if there is money in the account when medical bills start to arrive. Many employers think that the solution to this is to contribute seed money to the employees’ HSAs.
While at face value this seems like a beneficial strategy, one of our HSA partners, conducted an interesting comparison of two similar companies. One was giving seed money to their employees, and one was contributing on a match basis. The findings showed that employees who were given an HSA match contributed significantly more compared to employees who were given seed money. 88% of HSA members contributed when their employer offered a match compared with 40% of HSA members who received seed money. Additionally, the research showed employees contribute four times more to their HSA when their employer offers a match. For every $100 employer contribution, employees in a match plan will contribute $285 while employees in a seed plan will contribute only $49. Which employee is better set up for success when the medical bills start to arrive?
Another interesting thing to consider is the cost to the employer in the two scenarios. It is surprising to learn that employers who contribute to HSAs on a seed plan will end up contributing 42% more overall. There are real savings to the employer by contributing with a match plan vs a seed plan. The match plan also encourages employees to take ownership and contribute more as well.
If you have any questions about how to set up an HSA or want help implementing a successful HSA contribution strategy, the team at Silberman Group would love to help you!
