PLANADVISER - January/February 2018 - 45

Report shows that 47.0% of plan sponsors offer an HSA,
with this number steadily rising concurrently with plan
size-22.6% of plans with less than $1 million in assets up
to 75.8% of plans with more than $1 billion in assets.
Understanding HSAs
Shelby George, senior vice president of adviser services at
Manning & Napier in Fairport, New York, says one of the
most compelling reasons employees should use an HSA is
these plans allow them to essentially self-insure by setting
aside money to pay for out-of-pocket health care expenses.
In a recent article on the firm's website, George expands
on the value of the plans: " These powerful savings vehicles
offer a triple tax benefit to consumers. Money goes into
them tax-free, can be invested tax-free and comes out taxfree
if used for a rather generous list of qualifying medical
expenses. Savers can also use their dollars for general
expenses in retirement-i.e., after the age of 65. The money
does not need to be used by a certain date, is investable and
[is] portable between jobs. This means the cash saved in
an HSA can compound over the years and become another
significant source of savings. "
For calendar year 2018, the annual HSA contribution
limit for an individual with self-only coverage under an
HDHP is $3,450. For an individual with family coverage, it
is $6,900.
George says it is common for employers and providers
to allow employees to invest their HSA assets. But there are
differences in providers and the way they handle investing,
she notes. For example, some may have minimum requirements
for amounts held in cash, and employees will need
to save up to that amount before they can invest. She adds
that, typically, investing HSA assets requires individuals to
be proactive, because there is little automation, as with DC
plans, and rules can vary widely from employer to employer
or provider to provider. However, says George, providers are
continuing to develop technology to make investing HSA
assets easier.
HSAs as Part of the Practice
George sees an untapped opportunity for advisers to talk to
their plan sponsor clients about whether they offer HDHPs
and whether these are paired with HSAs. However, she says,
such discussion requires deep subject matter expertise.
Kevin Nolan, financial adviser with Essex Financial, in
Southport, Connecticut, says most major financial firms
have resources about HSAs. Advisers can use these to teach
themselves about the accounts, as well as HDHPs, and to
help them communicate with sponsors and participants.
For advisers who may be interested in more support or
who lack expertise, George says, it is important to work
with a benefits broker or an HSA provider that has health
plan knowledge and can help educate employers about all
options. " The more that advisers can either [cultivate] that
expertise themselves or have that in their network, the
better prepared they are to handle sponsor concerns and
make sure employees' financial plans are more complete. "
According to Tim Slavin, senior vice president, retirement
solutions, at Broadridge in New York City, many times
advisers pair with HSA providers. While Broadridge only
supplies custody for HSA assets, a number of providers
administer HSAs and distributions, give web access or even
time with an adviser to help manage investments. He likens
the partnerships to the ones advisers have with third-party
administrators (TPAs) for DC plans. " Some of the mega
adviser firms probably have alliances, but even independent
advisers can team up with HSA providers, " he says.
Slavin says he is seeing more advisers involved in offering
investment products for HSAs. " Advisers can holistically
help participants who have HSAs available-help them with
saving and investing in HSAs so they will have money set
aside for health care issues in retirement and do not have to
tap into their DC plans or use required minimum distributions
[RMDs] for health care expenses. "
At Essex, the bulk of the clientele is older than 50; around
age 55, these people start to zero in on retirement. Essex
advisers educate individual clients about expenses and
which ones may go up or down during retirement and then
works on a drawdown strategy from their assets, including
from DC plans and HSAs.
Nolan says Essex advisers also educate employees about
future health care costs, such as long-term care or nursing
care expenses in their state. The firm gets data about health
care expenses in retirement from providers such as Fidelity,
J.P. Morgan and Charles Schwab. According to Nolan, one
out of two retirees will be in a nursing home at some point.
Clients should know that they can use HSA assets for longterm
care premiums as well as nursing home costs.
While health care expenses may not be a traditional
conversation for plan advisers, they are of deep concern to
plan sponsor clients and their employees. Plan sponsors and
" employees are going to be happy when their retirement plan
adviser approaches them saying, 'Let's talk about Medicare
premiums and out-of-pocket health care expenses in retirement
and how to invest for that,' " Slavin says.
" Health care costs are so significant to retirement
planning that they cannot be ignored, " George says. " HSA
education or calculators estimating health expenses were
once considered differentiated capabilities, but advisers
should think of them as part of their core offering. "
-Rebecca Moore
KEY TAKEAWAYS
* HSAs have become more prevalent as more employers
have turned to high-deductible health plans.
* High health care costs in retirement, the tax benefits
and flexibility of HSAs, and the accounts' growing
prevalence with plan sponsors are some of the key
reasons advisers should include them in their practice.
* Benefits brokers and HSA providers can educate
advisers about HSAs to help them serve this market.
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PLANADVISER - January/February 2018

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