Without significant education, many employees do not understand their HSA benefits. They often get them confused with flexible spending accounts, for example, or they fail to see how HSAs could affect their own circumstances with regard to financial wellness and retirement savings.

This was the conclusion of a panel of industry experts at the 2022 PLANSPONSOR-PLANADVISER HSA Conference, which discussed the “what,” “how” and “when” for HSA education and communication. The goal of the discussion was to help plan advisers, plan sponsors and individual employees get engaged with HSAs and gain the most from the rapidly growing savings vehicle.

To illustrate the importance of educating employees about HSAs and health care, Amy Richardson, Fidelity go-to-market and product support vice president, said that almost 50% of people expect to spend less than $100,000 in retirement for medical expenses. But a healthy married couple can expect to spend closer to $300,000—more than triple what many families anticipate.

“Another important note is that over 40% of people have considered postponing retirement in order to be able to cover health care expenses, and 31% of hardship distributions from 401(k) plans are for health expenses,” Richardson said. “Being able to leave the money in the HSA to allow it to have the compounded growth for retirement is important, but also being able to access it for medical expenses without it being taxable or penalized is another really great factor for having an HSA for your employees.”

The average account balance for a 401(k) or 403(b) plan today is around $100,000—or less than half of what a married couple can expect to spend on care in retirement, observed Jamie Greenleaf, OneDigital retirement and wealth senior vice president. A key part of HSA education, she explained, is helping people to see that such a wide health savings gap exists in the first place. Too many people expect their medical spending needs in retirement to be covered by Medicare, when in fact this program often covers only a fraction of an individual’s retirement health care expenses.

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