If it seems like employees are struggling with mental health and well-being more than ever before, they are. Pew survey results reported by Kim Parker and Juliana Menasce-Horowitz on March 9, 2022, revealed mental health and unhappiness are among the myriad factor driving the Great Resignation. Employers across the United States that are confronting this ongoing historic labor shift must heed the roughly half of survey respondents who cited not having good benefits as a major or contributing reason they quit a job during 2021.
Specifically, employers must view the current situation as an opportunity to reevaluate their benefits offerings. Well-designed health benefits plans can help employers meet their objectives by improving the bottom line, attracting and retaining the best talent, and improving overall employee morale.
A solution most public sector employers can implement is offering a high deductible health plan (HDHP) with a health savings account (HSA). Combining the two offers savings and tax advantages traditional health plans cannot duplicate. Additionally, data from the annual HSA Bank Health & Wealth Index 2021 show individuals enrolled in HDHPs had rates of engagement with their health care benefits that were nearly 10 percent higher than the rates of engagement for individuals enrolled in traditional preferred provider organizations (PPOs).
The use of preventative care and screening services, in particular, was higher for individuals in HDHPs. At the same time, individuals with access to HSAs were 17 percent more likely than those with PPOs to frequently or occasionally save money for future health care expenses.
What Are HSAs?
HSAs are personal savings accounts that help employees set aside pretax dollars for health care expenses. When combined with a HDHP, an HSA gives the account holder the opportunity to save and invest funds for years to come.
Unlike flexible savings accounts (FSAs) that are owned by employers, HSAs are controlled by individual account holders. Funds placed in an HSA remain available even if the person who set up the account is furloughed, changes jobs or retires.
Another major difference for HSAs is that the balance rolls over from year to year. Historically, FSAs reset to zero each year. Temporary rules adopted for 2021 and 2022 allowed FSA rollovers, but those rules expire at the start of 2023.
Funds from HSAs can be used to cover IRS-qualified medical expenses even after an account holder turns 65. Qualified expenses include deductibles, coinsurance, prescriptions, vision care and dental care for the account holder, their spouse and their dependents. Importantly, and something employers should remind employees, HSA funds can be used to pay for mental health screenings and therapy.
The key benefit of an HSA is its triple tax savings. An HSA is the only account individuals can put money into, gain interest on and use to pay for IRS-qualified health care expenses without ever paying taxes on the money. Even pension and 401(k) payments get taxed.
Keep Employees Informed
Simply making HSAs available to employees is not enough. Educating individuals on their plan options and health care costs is key. Well-informed employees are more likely to make smart decisions and know how much to save for future medical expenses, such as those around mental health.
Employers should communicate about health care benefits throughout the year. Having a strong communication strategy in place is essential because, as the HSA Bank Health & Wealth Index 2021 showed, there is a continued lack of understanding and engagement with health plans across America.
Many employees do not understand the difference between preventive care and other forms of medical care. They do not know which preventive services are covered by their plan. Shockingly, data in the Index show only 11 percent of Generation Z consumers knew what their health plan deductible was. Overall knowledge of out-of-pocket maximums was also low for Americans of all ages, at just 22 percent.
Encourage Participation
Employers can help employees take advantage of HSAs by offering incentives or matching contributions similar to those available for 401(k)s. This can be especially empowering for lower-income employees, and more employers are considering income-based contributions that favor lower paid employees who may need extra help paying health care costs under an HDHP. Other employers are opting for incentive-based HSA matching. In all situations, it is imperative for employers to act equitably and transparently.
Evidence that encouraging active participation may be needed comes from Devenir’s 2021 Year-End HSA Research Report. Last year, 21 percent of HSAs were unfunded. Incentives and employer matching present opportunities to increase engagement and use.
Incentives can be small to start. For example, an employer could offer to deposit $100 in the HSA of each employee who keeps an appointment for an annual physical. A cash incentive or higher HSA match percentage could also be offered for enrolling in an HDHP or designating money from each paycheck as an HSA deposit. Importantly, employers can claim HSA matching payments as business expenses.
Employer HSA contributions tend to heighten employees’ engagement and happiness with their accounts. Seeing an employer support HSAs also enhances the perceived value of the health care benefit.
Understand the Rules for Cafeteria Plans
Cafeteria plans are the structure under which employers provide certain benefits on a pretax basis. It is also the way that most employers structure their HSA contributions, and the only way to facilitate pretax payroll, wellness, matching or similar contributions from an employer.
While cafeteria plans offer flexibility and creativity by allowing employees to choose from a variety of pretax benefits, the plans must follow Code 125 Nondiscrimination Rules. Essentially, these rules provide employers with maximum flexibility in plan design as long as the employers do not discriminate in favor of highly compensated or key employees.
The nondiscrimination rules also apply to all employer contributions made through a cafeteria plan. To comply with the rules, employer contribution programs must pass tests for employee eligibility, contributions and benefits, and “key employee concentration.” Employers who chose to make taxable HSA contributions without offering a cafeteria plan, which is typically not advisable, must comply with a separate, more rigid structure of comparability. Working with an expert in plan design is recommended in all circumstances.
Bring It All Together for Employees and Your Agency
When combined with an HDHP, an HSA offers unique savings and tax advantages. The money in an HSA does not disappear at the end of each year, and HSA funds stay with the individual no matter where they go in their career. HSAs also allow account holders to invest the funds in interest-bearing accounts and to spend the funds on mental health care.
With a large percentage of employees citing the lack of good benefits as a reason they quit one job to take another, all employers should consider offering HSAs and incentives or matching contributions for active participation. With some simple shifts in benefits offerings, strong plan design and proactive communication, employers can meet current employees’ needs and attract new talent.
01 June 2022
Category
HR News Article