Research Shows How HSAs Are Used Over Time

According to the Employee Benefits Research Institute, an analysis of how people use their health savings accounts over time showed that most people did not use them as investment vehicles but as special checking accounts instead. HSAs give people the ability to save money with a favorable tax incentive for medical expenses. They can access the accounts immediately or in the future as needed. EBRI researchers said that many account owners were using their HSAs to pay for current coinsurance, medical copay obligations and plan deductibles instead of using the valuable tax incentives. There are three tax benefits, which include:

  • All account assets build up without tax penalties.
  • Contributions are deductible from the plan owner’s taxable income.
  • Qualified medical expense distribution is not taxed.

To produce this study, researchers at EBRI gathered data between 2011 and 2016. Employer and individual contributions were combined, and they grew from just over $2,300 in 2011 to over $2,900 in 2016. Funds were withdrawn by over 60 percent of all account holders. In 2017, the average annual distribution amount was almost $1,775. This reflected a rollover average of about $1,150. Although multiple tax benefits existed, only a single-digit percentage of account holders chose other investments.

Researchers believe that financial security grew over time. End-of-year balances showed that accounts opened in 2004 or before averaged over $14,500. Accounts that were opened after 2016 averaged just over $1,000 for a final balance. Older accounts were associated with higher contribution amounts. Among account owners who opened their accounts in 2005, the average contribution was over $3,600. The average contribution for accounts opened in 2016 was just shy of $1,300. Bigger and older accounts were also associated with higher distributions. The average annual distribution for accounts opened in 2016 was just over $1,000, and that amount rose to more than $2,700 for accounts opened in 2005.

The report showed that HSA owners realized the benefit of investing as time passed. Only about 10 percent of accounts opened in 2005 had non-cash investments. Approximately one percent of accounts opened in 2016 had non-cash investments. There were rules in place that prevented new account owners from investment activity since there were initial minimum balance requirements for them. When employers offer HSAs, they can help their employees by offering regular education and explaining the benefits associated with investing. Learn more about how you and your employees can more strategically manage their HSAs by speaking to a UBF consultant.


Alan Wang
Alan Wang
Alan Wang is the President of UBF and serves as the lead consultant. He has delivered the UBF solution set throughout the world and is highly regarded for his areas of expertise. You can follow him on Twitter @UBFconsulting.
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