HSA Contributions, Distributions Declined in 2020: EBRI
Few HSAs are invested in assets other than cash, but the research group expects that to change as accounts grow over time.
Health savings account balances increased by a modest $400 between 2019 and 2020, the Employee Benefit Research Institute reported this week. But average annual contributions fell 2% from an all-time high of $2,041 to $1,995, and average annual distributions plummeted to a record low of $1,714.
EBRI noted that lower HSA contributions could reflect pandemic-related employment concerns, and distribution declines may owe to fewer people seeking routine medical care during the pandemic.
The report is the fifth in a series of longitudinal studies from EBRI’s HSA Database that examine trends in account balances, individual and employer contributions, distributions, invested assets and account-owner demographics from 2011 to 2020.
The HSA Database contained 11.4 million accounts with total assets of $32.9 billion as of Dec. 31. Balances were measured at year end. Contributions and distributions were aggregated across each year.
The new report found that few account owners venture beyond cash to invest their HSA balance. In 2020, 9% of accounts were investing, up from 2% in 2011. The research showed that the longer an account is open, the likelier it will have investment.
Why the hesitancy to invest? EBRI said that in order to invest, account owners need a minimum balance. Many accounts are new, and so will not have a big enough balance to take advantage of investments.
In addition, account owners may be unaware of the option to invest, or they may be using the account only to pay for out-of-pocket expenses and do not want to take short-run risks with investment fluctuations.
“As individuals become more familiar with HSAs, they are using the accounts more as designed,” Paul Fronstin, EBRI’s director of health research and education, said in a statement.
“Account balances are growing over time, enabling longtime accountholders to withdraw larger sums when unexpected major health expenses occur. Plan sponsors that value employee financial wellness can work with administrators and advisors to better educate employees on the use of HSAs, including available investments.”