PLANADVISER - May/June 2018 - 8

practice development
The Value
Of HSAs
A
are
ccording to Pat Jarrett, founder
of recordkeeper HealthSavings
Administrators, in Richmond,
Virginia, " If you're going to be a retirement
guy, you need to know the best
ways to deal with the health care
problem. "
Health savings accounts (HSAs)
rapidly becoming
the
solution
to that problem. In January,
HSA accounts held $45.2 billion in
assets, Devenir Research found, in
a survey. HSAs are custodial taxexempt
trusts that an employee sets
up with an Internal Revenue Service
(IRS)-approved HSA trustee, such as a
bank or insurance company, to cover
his medical expenses, now or in retirement.
Whereas 401(k)s have a dual
tax advantage, HSAs have a triple tax
advantage-the money goes in, grows
and is withdrawn tax free, as long as
the expenses are qualified.
One key requirement is that the
account accompany an HSA-qualified
high-deductible health plan (HDHP).
Both employee
and employer may
contribute, and the money can be
accessed immediately, says Suzanne
McGarey, managing principal with
Ascende's health and welfare benefits
division, in Houston. This year, an individual
may save $3,450 and a family
twice that, she says. Once turning
65, the owner may use the money for
nonmedical purposes, but it will be
taxed as income. If he does this before
65, he pays a 20% penalty.
" Administering HSAs is a relatively
new business, and, as companies begin
to operate in this industry, they've
developed different service models, "
McGarey says. " We've seen sizable variations
in fees such as monthly service
fees or rollover fees " -the accounts
being portable.
Advisers can play an important role,
she notes, in understanding the HSA
administration fee set-up, explaining
that to plan sponsor clients and helping
them determine which, if any of the
fees they want to cover, she says. Also
important is counselling participants
on investments.
All of these, like with a 401(k), are
fiduciary responsibilities, Jarrett notes.
For advisers wanting to enter the
HSA space, a good way to start is to ask
their plan sponsor clients whether they
offer an HSA-qualified plan, says Kevin
Robertson, chief revenue officer (CFO)
for HSA Bank in Sheboygan, Wisconsin.
If they do not, ask if they intend to.
Then, explain the concept, assuring
them future counsel if they should
change their minds, he says.
If they do offer one, the adviser can
work with the sponsor to choose the
best HSA provider and administrator,
based on services, fees and investment
possibilities, McGarey says. Many
HSAs do not permit investing, so it is
important to shop around.
The adviser also should decide how
much involvement he wants to take on.
Those who want to hand off administration
can turn to HealthSavings
Administrators or another such
provider, then concentrate on investments.
" We let the adviser put together
a list of funds that complement or
mimic what's happening with the
client's 401(k) " or build a lineup or portfolio
he especially likes, Jarrett says.
HSA Bank, similarly, offers turnkey
administration services, including
enrollment,
contribution processing
and reporting, and customer service.
" The adviser can insert himself, or
not, into any part of that equation, "
Robertson says. This year, the bank
plans to launch " an adviser-driven HSA
solution, " he says.
Sometimes advisers' clients already
offer HSAs, but this actually can
create an opportunity, McGarey says.
For example, Ascende health benefits
advisers may establish HSAs when
designing an HDHP. But those advisers
are not licensed to consult on investment
decisions, allowing the retirement
adviser to step in. " Realistically,
the retirement adviser will likely take
over when the accounts have [reached]
a certain level of revenue, and they are
viewed as another long-term investment
to be coordinated with 401(k). "
-Karen Wittwer
8 | planadviser.com may-june 2018
Art by Micky Walls
http://www.planadviserdigital.com/planadviser/may_june_2018/TrackLink.action?pageName=8&exitLink=http%3A%2F%2Fplanadviser.com
PLANADVISER - May/June 2018

Table of Contents for the Digital Edition of PLANADVISER - May/June 2018
