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BUSINESS PARTNERfeature article

          Surveys Show Rising Health Care Costs Affect

          Retirement Savings – HSAs Are a Solution

          Like many Americans, Gavin Smith’s employer is offering   •  30 percent have delayed retirement as a result of rising
          only a high deductible health plan (HDHP) next year.        health care costs.
          Having two active sons and knowing the HDHP has higher   Another survey, the 2017 Workplace Benefits Report by Bank
          out-of-pocket amounts, he is worried about having enough   of America Merrill Lynch, also indicates that health care costs
          money to pay the medical bills. Gavin decides to reduce the   negatively affect financial wellness. This survey included a
          amount he saves for retirement to help free up more money   national sampling of 1,242 employees across the U.S. whose
          for health care costs.                                employers offer 401(k) plans. Survey results show that 79
                                                                percent experienced an increase in health care costs in 2016
          A recent survey by Employee Benefits Research Institute   (up from 69 percent in 2015). Among those experiencing an
          (EBRI)/Greenwald & Associates shows that Gavin is not   increase, 56 percent are spending less or contributing less to
          the only worker making a choice like this. Some workers are   their financial goals and about 62 percent are saving less for
          sacrificing their retirement security to meet their potential   retirement.
          medical expense obligations. Unfortunately, this only
          shifts the financial burden from health care to retirement   HSAs Growing
          readiness.                                            Although the cost of health care seems to be having a negative
                                                                impact on saving for retirement, it is shedding light on
          While HDHP enrollment continues to grow, some         a possible solution – saving with an HSA. The number of
          workers and employers may not realize how health savings   HSAs and the amount of HSA contributions are at all-time
          accounts – a component of HDHPs – can reduce their    highs,  and  are  a  clear  reflection  of  growing  enrollment  in
          financial concern. Workers save money using tax-free HSA   HDHPs. And expectations are that this trend will continue if
          distributions for qualified medical expenses. And similar to   employers continue moving to HDHPs.
          retirement plans, many employers help fund their workers’
          HSAs to encourage HDHP enrollment, which is a cost    Devenir, a national leader of customized investment solutions
          savings for employers and workers alike.              for HSAs and the consumer-directed healthcare market,
                                                                conducts annual HSA market surveys of the top 100 HSA
          Worker Dissatisfaction                                providers. Devenir’s 2016 Year-End HSA Market Statistics
                                                                and Trends report shows that the number of HSAs exceeded
          The Employee Benefits Research Institute (EBRI)/      20 million at year-end 2016 (a 22 percent increase over 2015),
          Greenwald & Associates recently released the 2016 Health   holding almost $37 billion in assets (a 20 percent increase).
          and Voluntary Workplace Benefits Survey (WBS), which
          shows that some workers are sacrificing their retirement   Of a total $25.5 billion HSA contributions made in 2016,
          security in response to rising health care costs. The survey   •  26 percent came from employer contributions ($868
          included 1,500 workers between ages 21–64. The results      average employer contribution),
          show, among other things, that some workers are reducing   •  46 percent from employees ($1,786 average employee
          their  retirement  plan  contributions,  taking  loans  and   contribution), and
          withdrawals from their retirement savings, or delaying
          retirement.                                             •  19 percent from individual contributions not
                                                                      associated with an employer ($1,713 average individual
            •  28 percent of workers who reported an increase in      contribution).
                health plan costs decreased their retirement plan
                contributions, and 48 percent have decreased their   The survey also shows that health plan partnerships are the
                contributions to other savings.                 largest driver of new account growth in 2016.
            •  12 percent took a loan or withdrawal from their    •  Health plan referrals account for 37 percent of new
                retirement plan.                                      accounts opened.

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