Employees who are completely new to the workforce have different goals and needs — not to mention budgets — from those who are mid-career or close to retirement. These employees may not have had experience making benefit decisions prior to starting employment with your company, as they may have been covered by their parent’s plan. Employers should consider how to educate and inform these employees in a comprehensive way, especially as it pertains to the benefits of health savings accounts (HSAs) and the importance of developing good savings habits early on.
We’ve identified a few suggestions to help you guide recent college graduates and early-career employees to get off to a great start with HSAs.
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Employees new to the workforce have a lot on their minds, the least of which may be saving for medical expenses. They might associate “savings” with “less money for them to spend now.” They need to understand that unexpected medical expenses can occur, and it’s better to ensure that money is put away and available than to be caught off guard by these expenses later.
We know that employees will have questions about HSAs, so here are some helpful responses you might want to consider.
Employee: Why should I open and contribute to an HSA?
Employer: An HSA can help you cover medical expenses from an unexpected illness, sports injury or accident, such as copays for doctor’s office visits, X-rays, lab tests and more. Things can happen. For example, after a record-low number of sports and recreational injuries reported in 2020 (based on emergency room visits), injuries increased 20% in 2021 and another 12% in 2022, according to the National Safety Council.
One expense you need to budget for when you have your own medical insurance is the deductible. This is the amount of money you must pay before insurance kicks in and starts paying a portion of your medical expenses. The money in your HSA can pay for expenses that apply toward your deductible.
Employee: What happens to the money in my account if I don’t spend it?
Employer: The money in your HSA is yours to keep. It is a bank account in your name, and while you may be making contributions directly through your employer, the money is yours even if you should leave that employer or don’t use the HSA at all because you don’t have any medical expenses. Unlike flexible spending accounts, there is no “use it or lose it” policy associated with HSAs.
Employee: How much should I contribute to my HSA?
Employer: A little in your HSA goes a long way. Even a $500 or $1,000 annual contribution helps you set aside money for unexpected medical expenses when you need it most. Remember, HSA funds accumulate over time, and the money is free from taxes, so you are getting more bang for the buck.
If you have some extra money in your paycheck and want to take full advantage of the tax savings that comes with an HSA, you could contribute up to the HSA maximum ($4,150 for single coverage, $8,300 for family coverage in 2024). If that’s a little out of reach, consider contributing the amount of your medical deductible to your HSA (the 2024 minimum annual deductible for high-deductible health plans is $1,600 for individual coverage and $3,200 for family coverage).
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Employees have a lot to learn when they start a new job, and onboarding information can be overwhelming. Try these tips to improve their experience when talking about health insurance and HSAs:
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Here are the types of scenarios you might want to leverage in your own communications. Remember, younger employees do not tend to think about medical expenses in the same way as older demographics.
While first-time hires may not fully understand the concepts of HSAs and saving for retirement, it’s important for them to consider the importance of developing good savings strategies early in their career. Beyond the advantages of maximizing earnings potential, having a cushion against medical expenses that could occur later is essential, no matter how healthy someone is now. As their employer, you play a crucial role in getting them off to a good start and helping them to develop solid financial habits that will serve them throughout their entire careers.
