Is it Time to Offer a Financial Wellness Benefit?

Healthcare CostsStudies show that regardless of age, few employees consider financial wellness in terms of retirement, leaving them vulnerable to serious financial difficulties in later years. When surveyed, employees of all ages named “freedom from financial stress and debt, enjoying life and being prepared for emergencies” as their ideal state of financial wellness.

While the definition of financial wellness benefits and best practices vary widely, one thing is certain – employees and employers are being negatively impacted by financial pressures and widespread financial illiteracy. A PricewaterhouseCoopers study shows that more than 40% of employees spend three hours of their work day dealing with personal finances. Be it insufficient retirement planning or struggling to make ends meet, employees across a wide spectrum of industries are in desperate need of help.

Meeting Employee Needs

The good news is that financial wellness programs are on the rise. One insurance company, in fact, expects the number of plan sponsors offering such a benefit to grow from 17% to more than 50% over the next five years. And while many employers are uncertain as to what a program might include, most agree that financial wellness is not only good for the employee’s holistic health, it creates a very positive outcome for the employer as well.

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Workers Retiring Later

The Society of Actuaries reports that nearly one in five Americans in their early 70s are still working. A big reason cited is that the age at which people can claim full Social Security benefits is currently 66. With actuarial tables showing that a 65-year old male can expect to live an additional 20 years, working longer has become a necessity, since retirement may very well last far longer than previously anticipated.

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Why employees should max out HSA contributions

The article below was published on September 13, 2017 by Employee Benefit News, written by Robert Lawton.

With healthcare open enrollment season quickly approaching, 401(k) plan sponsors may want to spend some time educating participants on the use of health savings accounts. If you offer a high-deductible health plan to your employees, they probably have the ability to contribute to HSAs. I believe that nearly everyone eligible to contribute to an HSA should max out their HSA contributions each year. Here’s why.

HSAs are triple tax-free
HSA payroll contributions are made pre-tax and when balances are used to pay qualified healthcare expenses, they come out of HSA accounts tax-free. Earnings on HSA balances also accumulate tax-free. There are no other employee benefits that work this way.

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HSA payroll contributions are truly tax-free

Unlike pre-tax 401(k) contributions, HSA contributions made from payroll deductions are truly pre-tax in that Medicare and Social Security taxes are not withheld. Both 401(k) pre-tax payroll contributions and HSA payroll contributions are made without deductions for state and federal taxes.

No use it or lose it
Employees may confuse HSAs with flexible spending accounts, where balances not used during a particular year may be forfeited. With HSAs, unused balances carry over to the next year. And so on, forever. Well at least until the employee passes away. HSA balances are never forfeited due to lack of use during a year.

Retiree healthcare expenses
Anyone fortunate enough to accumulate an HSA balance that is carried over into retirement may use it to pay for many routine and non-routine healthcare expenses. HSA balances can be used to pay for prescription drugs, medical premiums, COBRA premiums, dental expenses, Medicare premiums, long-term care insurance premiums and of course any co-pays, deductibles or co-insurance amounts. There are no age 70 1/2 minimum distribution requirements on HSA accounts like there are on 401(k) and IRA accounts. This makes HSA accounts a much more tax-efficient way of paying for healthcare expenses in retirement, especially if the alternative is taking a taxable 401(k) or IRA distribution. Continue reading