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Welcome to The JoyPowered® Workspace Podcast, where we talk about embracing joy in the workplace. I’m JoDee Curtis, owner of Purple Ink, an HR consulting firm, and with me is my friend and co-host, Susan White, owner of Susan Tinder White Consulting.
Our topic today is “Health Savings Accounts 101.” Health savings accounts were created in 2003 so that individuals covered by high deductible health plans could receive tax preferred treatment of money saved for medical expenses. Generally, an adult who is covered by a high deductible health plan and has no other first-dollar coverage may establish an HSA. Susan, I was an HR director at the time that HSAs came out and I was a very early adopter of HSA plans. As soon as they were available, I was educated by our benefits advisor, understood the tax benefits, and we spent lots of time and energy educating our organization, yet, I feel that 17 years later, there is still so much confusion around this topic. So I wanted us to provide more education to our listeners.
I’m glad. Thank you.
Our first expert today is Kim Walker. Kim has over 30 years of experience in the financial services industry. Working in various aspects of the financial world, Kim started her career as a teller and is currently the Assistant Vice President of Retail Delivery for FORUM Credit Union here in the Indianapolis area. She is an integral part of leading the branch network and sales teams, and FORUM is one of the largest credit unions in Indiana with just over $1.5 billion in assets, serving over 159,000 members.
Alright, so welcome Kim, and thanks for joining us today. So, tell us again in your own words, what are health savings accounts, and who could or should have one?
Well, a health savings account is a personal account for individuals who are enrolled in a qualified High Deductible Health Plan and it really only needs to be used for qualified healthcare expenses. So it’s, actually it’s – like a checking account, really, but it has some stipulations, as I mentioned, it has to be used for healthcare expenses, and it has a limit, and the government sets those limits and they typically change from year to year, and for 2020, this year, an annual contribution, so deposits that can go into the health savings account, right now is it’s self, an individual, it’s $3,550 that can be deposited into this account, and if it’s a family, it’s $7,100. And if you are fortunate enough to be 55 or older, you can deposit an additional thousand dollars on top of that.
And Kim, why should people think about contributing to a health savings account? What’s in it for the individual?
Well, there’s so many different reasons for that, and I just have a few. The contributions to the health savings account are usually made pre tax, so that helps you come tax time. Earnings in the account grow tax free. The unspent money rolls over, so you don’t have to use it in that year. So you don’t have to worry about, like a FSA, that you have to use it in that time frame, so it just continues to roll over. And also, that money in your safety or health savings account, you can take it with you. So let’s say that you change health plans, or you change employers. That money is for you, so you don’t have to leave it somewhere, and you can withdraw the money from your health savings account at any time.
And how should we be using a health savings account?
Well, like I mentioned you can withdraw at any time. However, the funds in your health savings account should only be used on qualified health care expenses. So sometimes, you know, some of us think getting a vanilla shake is a medicinal purpose, but that’s not true! We should only purchase, using our HSA card, on things that are generally used for medical, dental, vision care expenses, those things are considered qualified medical expenses. And there’s many different definitions for that, but for more information to get a full list, I always go to the irs.gov, and if you search Publication 969 or if you go to the irs.gov and you search Forms 502, or 502, forgive me, then you can get a list of what some of those qualified medical expenses, what those are, and that’s where you can find those lists, so make sure that you stay within the parameters that the government set for qualified expenses.
Kim, can an individual set up an HSA themself, or do they even have to work for an employer and the employer sets it up and then they just take advantage of it?
You could do that either way. So, as long as you’re under that qualified healthcare plan, you can walk into financial institution and open one up, or the employer, if you work for an employer that offers that, they can take care of that for you as well.
And Kim, how would I know – how would a listener know if they’re in a qualified health plan?
That’s where you would want to check and see, go over to the irs.gov and make sure and see, also check with your tax advisor and see if you are in that high deductible health care plan.
So Kim, we have a lot of international listeners. Are HSAs a US thing, are they available in countries all over the world?
There’s been discussions of medical savings accounts in China, South Africa, but I couldn’t find anything to see what US has, and as we’ve seen a recent – the health care around the world is vastly different from country to country. But what we have, the healthcare savings account, it’s here for the US, because it’s based on tax deferment and different things like that, so it is pretty much in the United States that offers the healthcare that we know it, the health savings account.
And Kim, we’ll put a link to those forms you mentioned in our show notes for the podcast. But if our listeners want to know more about HSAs, how can they get in touch with you, and specifically how could you best help them?
They can call me at 1.800.382.5414, and I’m at extension 6132. Or my email, kim.walker at forumcu.com. And if they’re interested in learning more about FORUM Credit Union’s health savings account or FORUM in general, they can contact me at any of those, my phone number or my email address, I’d be happy to talk to about FORUM specifically or health savings accounts in general.
Yeah. Alright, well, thank you, that was helpful information to our listeners.
Thank you, Kim.
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We have a second expert with us today. Brea Dantin is the co-founder and an advisor at ProCourse Fiduciary Advisors and has specialized in retirement savings and employee benefits for nearly 20 years. Working with people and being able to coach those who need financial support feels natural to Brea. The challenge to get groups of employees on track for retirement is what keeps her going. Her diverse experience gives her an unparalleled pulse on trends in the retirement plan industry, which she leverages to assist clients in improving their plans for both plan sponsors and participants alike.
So Brea, what are people missing out on when they label HSAs as a healthcare tool?
JoDee, that’s really a great question because I think they’re missing out on something truly special. One of the biggest expenses that individuals have in retirement is healthcare. And so, when I look at the HSA I have converted it mentally, and the message that I’ve been sharing out is it’s really a part, not only of maybe transactional medical needs today, but really part of a long term retirement strategy. You may have heard, you know, a lot of folks talk about the three legged stool, which is Social Security, you know, employer sponsored retirement plans, and personal savings. I think that stool gets even more solid when you add that fourth leg of HSAs. So, you know, this is something that I’m truly passionate about and I think that it’s just an extremely valuable tool.
Brea, when I think about HSAs, and I realize the dollar limits that people can put in each year, it doesn’t seem like very much money is accumulating, but am I wrong?
You know, I would have thought the same until I started doing my research. I’ve been talking about it a lot, I’m really passionate about it. But a couple of the studies that I’ve looked into, some from Fidelity and other HSA providers, have reflected almost $65 billion. And yes, I said billion, not million. So I think that you’re not the only one that’s, that has that perception, that these are really transactional, they probably go to zero every year. But what the data is showing us is, is that is nowhere near the case. There is a lot of money accumulating.
So the key is, although Kim was telling us we can take money out for healthcare expenses, is not to take it out, right?
I think that we really have to think, you know, coming from an advisor’s perspective I realize that we have really three personas when you think about HSA users. There’s going to be the transactional folks that absolutely need to spend every dollar, they just can’t afford to accumulate, then I think we have hybrid personas, people that are both utilizing the assets today to pay for medical, but they’re saving a little bit more than they need, and then you’ve got the hardcore savers like myself, I won’t even let my husband touch it. And he’s had a couple medical procedures, and he’s like, “Come on! I want to buy XYZ,” he’s a cyclist, so he wanted to buy a new bike and I said, you need to talk to your doctor because your, your new bike is, really looks like it’s the medical procedures because you can’t touch that money.
That’s awesome. So, you know, I mentioned at the beginning that HSAs have been around for a while now, but what are some of the hurdles in getting better HSA utilization?
I think that, you know, is a really great question. When I think about how HSAs are being communicated out to employee populations, for the most part it’s part of an open enrollment benefit discussion. And if you’re anything like me, at a certain point in those open enrollment meetings, even if the presenter is hilarious, you start to tune out, because what employees are really thinking about is, what, what’s happening to my premium, what’s happening to deductibles, what are the changes. So they’re not necessarily keying in on, oh, I really need to think about this HSA tool that they’re going to educate me about. So that’s one thing. The second thing is, I think many of those educators when it comes to open enrollment and HSAs are really still positioning them as a way to lower out of pocket costs. And they’re not, you know, one of the things that I’m very jealous of is this was put into the healthcare system rather than the true financial solution that it provides to folks. And so, I think positioning is a little bit off. Yes, it can help lower out of pocket costs, but that’s only one way of looking at it. So I think that’s a hurdle, and I’ve only got about two more. I’m sure there are many others. But HSA providers, for the most parts, you know, a lot of times it started out with banks, you know, great credit unions like FORUM Credit Union that you had on today’s podcast, but they looked at it again as an, as a transactional account, so they’re not reaping a lot of revenue off of those to help pay for these education solutions. And that’s where the retirement plan industry, you know, my side of the business is saying, hey, we’ve been educating people about savings, about financial wellness. We have their email addresses, their home addresses, and we’re in constant communication. And so I think the HSA providers themselves, not all of them, but some of them have really not thought about what sort of intellectual capital needs to be pushed out to people to move beyond this transactional account. And then the last hurdle that I’ll touch base on is really evident in my own home. How do you reach the spouses? Because if I’m an employer, talking about HSAs or having my partners talk to my employees about HSAs I’m really reaching my, my team members my staff. But, you know, my husband laughs all the time, he says, I married you to pay the taxes, work on the taxes, pay bills, and deal with benefits. You know, he loves me and he thinks I’m adorable, but he’s like, these are things that you do for us. And a lot of communication has gone electronic, you know, whereas I used to get packets at the house and I could sit down and, and sift through that information. So what I try to do to help overcome this hurdle anytime I’m speaking about HSAs or retirement benefits, which is really, you know, my side of the benefits world, is, hey guys, make sure you go home and talk to your spouses. Maybe the webinars are being recorded, there’s material that you can email on to your spouses, because, you know, they’re at least 50% of the decision making if not, you know, in my case, 100%, my husband says just tell me what I need to do. So I think those hurdles, you know, are things that we can get over, but they’re going to take a lot of change in the way we think.
You’re right. Brea, do you think that people should focus on maximizing their retirement accounts before their HSAs?
This is gonna shock you. I’m here today to just shock you guys.
My broad answer is no, and that might, you know, set some people off but, but here’s what I’m thinking. From a savings perspective, I think anyone who has a company match in their 401(k) or their 403(b) should, should maximize that first, then I think they should move on to maxing out their HSA, and then if there’s any discretionary savings left over, then go back to the retirement plan. And we’ll touch on in a little bit why I think it’s so critical to max those out. So, you know, everyone’s in a different situation and I want to point that out, so this is not custom advice to anybody. But as a general rule of thumb, I would max out the match, then the HSA, then go back to the retirement plan.
Nice. And what are some hidden gems that people should know about their HSAs?
If you guys could see me, I’m rubbing my hands together, because there are so many. I think one of the biggest ones, quite frankly, is the fact that at age 65, the HSA basically, now not literally, but basically becomes a… becomes an IRA. And what that means is, the money can come out of the HSA without penalty. Now if it’s a pre-tax IRA, you would have to pay regular income taxes and that’s the same in the HSA, but with the HSA the penalty for non-qualified medical expenses goes away when you turn age 65. I mean, who doesn’t want another IRA with extra benefits? So I think that is a hidden gem that not everybody is aware of. The other one is investing in the HSA. So I mentioned earlier that there’s about 65 billion or, we’re getting close to $65 billion in HSA assets, a little less than 20% of that is invested. And I think that’s because a lot of people don’t know that they can go in, for the most part, into their HSA account and move money into an investment window, and we talk about this a lot, again in retirement education, if you’re sitting in cash, or a money market equivalent, you may not be keeping up with inflation. The same thing is happening when I think about folks sitting on HSA money in a cash account. If you’re thinking about it as a long term savings tool, the value is really in moving that to the HSA and hopefully getting somewhere, you know, four to 6% returns instead of the less than 2% we would see in the cash account. And then the third one is for employers that have retirement plans that are not safe harbor, they have to go through annual discrimination testing. And one of those tests is called the ADP test, I’ll try not to get too in the weeds. But if they fail those tests sometimes their highly compensated individuals will get refunds, and refunds don’t make anybody happy, because it means that they couldn’t save as much as they wanted in their retirement program. But what I would encourage employers who are in this situation to do is chat with those individuals who are impacted by those refunds, because they may not understand the long term options through the HSA. And, again, my, you know, one of the things that I found out in talking to folks about HSAs, it doesn’t matter your education level, your compensation level, your title, this is still a misunderstood tool. And so, you know, some HR teams may say, well, my, my best and my brightest, they understand the HSA, and, and I would say, well, just reach out to them one more time, because you might find out that they’re using those accounts as a transactional, maybe they’ve got kids with broken arms. I find that children are very breakable, that causes people to use their HSAs quite frequently. But you might be able to counsel them to say, hey guys, we’ve been failing our ADP test for years. I know you’re going to get a refund. Are you maximizing the way you can utilize your HSA? So I think those are just some of the hidden gems that folks can find within an HSA if they are eligible to participate.
And Brea, one thing we haven’t talked about, let’s say for example that I contribute to my HSA for several years and I don’t need to use the money in that, I’m financially stable. And then, you know, I lose a position and, and then I do need to take some money out of my HSA. Can you talk about how I can use that still for expenses that have occurred in previous years?
Absolutely. Keep every receipt, every invoice that you’ve paid, because you don’t have to take the money out in the year in which the medical expense was – occurred. So it might be five years from now, but as long as you still have documentation that you paid for that medical expense out of pocket, you can still reimburse yourself, which is another great reason to maybe save a little more than necessary in your HSA, because that is also a hidden gem. Unlike the old flexible spending accounts where you had a certain time period where you had to take money out, these give us the flexibility to use them the way we need at the time period in which we need them.
Wow! I’ve learned a lot here. Brea, how could our listeners reach out to you if they want to learn more, or if they wanted to work with you on putting together an HSA strategy?
That is a great question. Thanks for asking, Susan. I can be reached in a couple different ways, you know, my direct line at the office is 317.708.4152, and I think you guys put links for folks to access our contact information, because my first name and my last name are unique, and I find people struggle with them. But my email address is bdantin at procourseadv.com, and folks can also find me on LinkedIn at Brea Dantin, which is B-R-E-A D-A-N-T-I-N. I couldn’t have married a Smith or something like that.
Well, Brea, thanks for all your information today I’ve learned a lot as well and we appreciate your time.
Absolutely. Thanks guys.
Alright, thanks Brea.
JoDee, our listener question today is, “What are some reasons why a company would not allow employees to work from home?”
Yeah, well, we’ve certainly had some experience with this one, haven’t we, with so many employers having to shift very quickly to having employees work from home during the coronavirus pandemic. And it was fascinating to me, really, to kind of observe and listen and see stories of people who had never worked from home before who easily made it work, but, of course, you know, as we all know, there’s many professions where we need people hands on site, certainly our medical professionals, our emergency responders, even people that work at banks and credit unions need to be available to people, now, I think they also found some creative ways to have drive throughs only, or to have many of their employees work from home. Certainly, retail operations, although many of those shifted to some more online sales during that time. And then, of course, restaurants, people need to be on site for them. But I do think we’ve, many companies figured out really quickly, some quick ways to allow people to work from home. Any other thoughts you have on that, Susan?
I think the companies that have been resistant to it, I think some of the reasons that I have heard, is that they feel like they can’t monitor the employee, especially if they feel like they’re non-exempt employees who, they have never been in an unsupervised environment, that they have concerns that they’re going to be paying for things that aren’t getting done, things like that. So I hear that reason, I don’t like that reason because I believe in – people will rise to the level of your expectation. I’m sure there’s a few exceptions, so I really think you’ve got to – I think it does take some trust. I’ve heard managers say, I don’t feel like our, I can trust – I can trust my employee, but I’m not sure about the security in that house. I’m not sure they don’t have people coming and going. Some of my employees might be working at the kitchen table, what if their teenagers are over, their friends are over, they’re able to see things, what if our documents, moving back and forth, you know, there’s some risk there. I think it’s important that you take time to think about data security, obviously, whatever information you have, I think that you can create protocol to ensure that that information is not at risk. So I – really, as the listener asked, what are the reasons why people aren’t, why companies don’t allow it. I think you should take each one of those one at a time. What are the fears, what are the risks, and figure out what can we do? There’s so much wonderful technology out there, there’s so many good experts that can help advise you on how to set up work from home. It’s really the right thing to do, and I think this pandemic that we’re, at the time of this recording, that we’re facing, the companies that had already established those things were just, they were ahead of the rest of the companies who had been dragging their feet on it, so. I don’t think the world will ever be the same, the world of work. Learnings from this is going to be able to help propel, I think, companies into more remote work, more effective remote work.
Yeah, I agree. You know, I heard an interesting conversation on a podcast, too, about that I think people are realizing it was a fallacy to think that you could lead better or manage better when people were right outside your office, right? Like it didn’t mean that, because you could see them, that they weren’t shopping online, or making personal phone calls, but there’s this fear that if they were working at their house, they would be doing things that were unproductive. So, I just think it really goes back to your comment about trust and having deliverables, right? What do you need your employees to accomplish in the day and what are their responsibilities, and are they getting those done or not? Whether they’re sitting at home or sitting right next to you.
Yeah, I think figuring this out is really important to your own business resiliency planning. For you to be able to survive, no matter what comes, you really want to be good at, I think, remote work management.
Right, right. In our in the news section today, earlier this year, Susan and I were guests on SHRM’s All Things Work podcast. The topic was around the shift in employees’ willingness to relocate for their jobs. Historically, relocation was accepted as a part of having a career, but in recent years, paid employee relocations have fallen. Likewise, approximately half of all workers in the US are saying that they are not willing to move for their professions. Interesting issues on both sides, as more employees want to work remotely versus moving, and employers are paying less for relocation. Check out the podcast in our show notes, or at All Things Work wherever you listen to your podcasts.
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