Pub. 7 2017-2018 Issue 6

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S May • June 2018 15 ing an increase, 56 percent are spending less or contributing less to their financial goals and about 62 percent are saving less for retirement. HSAs Growing Although the cost of health care seems to be having a neg- ative impact on saving for retirement, it is shedding light on a possible solution—saving with an HSA. The number of HSAs and the amount of HSA contributions are at all-time highs, and are a clear reflection of growing enrollment in HDHPs. And expectations are that this trend will continue if employers continue moving to HDHPs. Devenir, a national leader of customized investment solu- tions for HSAs and the consumer-directed healthcare market, conducts annual HSA market surveys of the top 100 HSA providers. Devenir’s 2016 Year-End HSA Market Statistics and Trends report shows that the number of HSAs exceeded 20 million at year-end 2016 (a 22 percent increase over 2015), holding almost $37 billion in assets (a 20 percent increase). Of a total $25.5 billion HSA contributions made in 2016, • 26 percent came from employer contributions ($868 average employer contribution), • 46 percent from employees ($1,786 average employee contribution), and • 19 percent from individual contributions not asso- ciated with an employer ($1,713 average individual contribution). The survey also shows that health plan partnerships are the largest driver of new account growth in 2016. • Health plan referrals account for 37 percent of new accounts opened. • Direct employer relationships accounted for 32 percent of new accounts. • The remaining drivers are insurance agent referrals (10 percent), administrator/TPA referrals (9 percent), and individuals (5 percent). While HSA assets are withdrawn every year to cover med- ical costs, the amount that is retained in HSAs continues to grow every year. When looking at contribution andwithdrawal activity, Devenir estimates that 22 percent ($5.7 billion) of HSAs assets were retained at year-end 2016. More Americans are moving to HDHPs—by choice or as driven by their employers—and the number of HSAs contin- ues to rise. Employers and individuals should understand the benefits of HSAs. • Individuals can pay for current medical expenses or save for future expenses with an HSA—there is no use it or lose it rule. • Contributions reduce taxable income. • Earnings on the account build tax free. • Distributions are tax-free if properly used for qualified medical expenses. • Individuals who save on medical expenses may have more money in their budget to focus on other savings needs. Educating employers and individuals about the tax benefits of anHSAwill not only encourageHDHP/HSAparticipation, but can free up funds for IRA and retirement plan contributions. n Christle Johnson has worked at Ascensus since 2001 as a con- sultant and an editor. Her work includes researching, writing, and editing a variety of topics on IRAs, HSAs, and employer-sponsored retirement plans. She also is editor of The Link newsletter and edits IRA, HSA, and Coverdell ESA compliance manuals and products. She has earned the CIP designation and the QKA cer- tification from ASPPA. She also holds a Bachelor of Arts degree in Mass Communications and English from the University of Minnesota, Moorhead, MN. Ascensus helps more than 7 million Americans save for the future—retirement, college, and healthcare—through service and technology solutions. With more than 35 years of experience, the firm offers tailored solutions that meet the needs of banks, credit unions, states, governments, financial professionals, employers, and individuals. Ascensus supports over 50,000 retirement plans, more than 4 million 529 college savings accounts, and a growing number of ABLE savings accounts. It also administers more than 1.5 million IRAs and health savings accounts. For more information about Ascensus, visit www.ascensus.com . Although the cost of health care seems to be having a negative impact on saving for retirement, it is shedding light on a possible solution—saving with an HSA. The number of HSAs and the amount of HSA contributions are at all-time highs, and are a clear reflection of growing enrollment in HDHPs. And expectations are that this trend will continue if employers continue moving to HDHPs.