In the News

Dan Basile Shares Best Practices for Fostering Engagement with Financial Wellness Programs

In a PLANSPONSOR webcast​ presented on March 25, Dan Basile, Ascensus’ head of retirement product, shared perspective on tactics employers can leverage to foster employee engagement with their financial wellness offerings. He encourages employers to utilize multi-channel communications tactics and to identify employee advocates who can act as champions of the program to their colleagues.

He also shared insight on why Ascensus chose to partner with Financial Finesse and how we’ve incorporated their wellness tools and services into our core retirement plan product to ensure employees across businesses of all sizes could access the tools and education they need to chart a personalized savings strategy. Watch a full recording of the webcast here​.

Rick Irace Shares Thoughts on the Outlook for Retirement Savings in 2020

In a recent article​​, Rick Irace, COO of Retirement, shares his thoughts on potential developments that retirement plan consultants should monitor through 2020. As always, plan consultants should keep up with the latest issuances from the Department of Labor, the SEC, and other government agencies. 2020 is also an election year, which means “it’ll be interesting to see what—if any—changes to the retirement plan landscape are discussed.” Advanced analytics are continuing to gain more and more prominence among plan sponsors and service providers, alike, which should advance the ability to forecast retention, gauge plan effectiveness, expand data points, and improve services.

Barb Van Zomeren Explains Key Implications of the SECURE Act Means for Retirement Plan Sponsors

In a recent PLANSPONSOR article​, ​SVP Barb Van Zomeren discusses the key changes that the SECURE Act brings to retirement plans. “The increase in the age for RMDs, the elimination of the ability of certain beneficiaries to stretch IRA payments over their lifetime, and the exception to the 10% early distribution penalty for distributions for birth or adoption of a child are the most urgent [changes] for plan sponsors to address,” she states. Van Zomeren says that more clarification is needed on the elimination of the distribution penalty for birth or adoption and the open-ended repayment period before plan sponsors should let participants take advantage of this feature. “Right now, plan sponsors should educate themselves [about SECURE Act provisions], prioritize which are impactful immediately, and consider others for plan design…Considering the law was enacted late in last year with a January 1, 2020, effective date, there will be additional guidance and relief [the retirement plan industry] should watch for,” she concludes.

Barb Van Zomeren Discusses How Advisors Can Help Women Overcome Retirement Savings Hurdles

SVP Barb Van Zomeren recently contributed a byline to ​Employee Benefit News​​ in which she discusses how advisors can help women​ overcome retirement savings hurdles. According to EBRI, the average retirement savings shortfall for single women is nearly twice that of single men. The Social Security Administration reported in 2019 that ​unmarried women rely on Social Security for 45% of their total income, compared to 32% for unmarried men and 27% for couples​.​​ Van Zomeren states that the main reasons for these discrepancies are that women earn 18.​6% less than men on average, ​live 2.4 years longer, have more healthcare costs, and are more likely to take career breaks to focus on family care. ​

Advisors can help their female clients by ​encouraging them to save in an IRA if eligible, contributing to an HSA for future medical costs, contributing enough to retirement plans to receive a full employer match, and learning more about investing.

Rick Irace Reflects on Key Trends in the Retirement Industry in 2019

In a recent article​​​, Rick Irace, along with other industry thought leaders, summarized key trends and developments in the retirement industry this past year. ​Irace noted that plan sponsors’ main goal has been to drive positive outcomes for employees. Ultimately, employers understand that overall financial wellness is crucial to “ensuring that employees are happy, healthy, and productive.​​​”​ The biggest topics of conversation have been security, service, data protection, and risk governance, as sponsors want assurance that plan providers can provide the support needed to run their plans while offering high-level service that’s built on trust.

How to Use the HSA, for Medical or Retirement Savings

Health savings accounts offer a unique triple tax advantage

The health savings account, or HSA, can be a powerful savings tool—if you approach it the right way.

These accounts, which Congress authorized in 2003, are more than just a simple savings tool for medical emergencies. Retirement planners laud the HSA’s triple tax advantage and its use as a complementary savings vehicle to 401(k) plans.

Oftentimes when people first hear of HSAs, it is during this time of year. For companies with policies that start in January, open enrollment typically happens in the fall. During this period, many employees are already stressed about choosing and selecting other benefits.

“I don’t think most people understand HSAs from the get-go,” said Roy Ramthun, a consultant who specializes in HSAs. “From my experience, the HSA gets 30 seconds of the health benefit presentation. It’s all about the insurance, and then ‘Oh, you have this.’”

HSAs are unique in the triple tax advantage they offer: You can contribute to them by setting aside pretax earnings without paying federal or state income tax. From there, that money can be invested and grows tax-free. Additionally, if used for medical expenses, you can withdraw this money tax-free before retirement, which you can’t do with a 401(k) or an individual retirement account.

Eric Remjeske, president of Devenir Group LLC, said since Congress authorized these accounts in 2003, the number of accounts and the average account balance have both grown over time. By 2011, there were 6.2 million HSAs, according to Devenir Research; this past June, that number had grown to 26.3 million.

More money is flowing into HSAs every year. Devenir Research data show that $43.5 billion was deposited in HSAs in 2018, with $10.2 billion invested, a sharp increase from the year before when $31.5 billion was deposited and $5.5 billion invested. By 2021, Devenir estimates that number will rise to $67 billion deposited with $21.2 billion invested.

While the 401(k) remains the predominant retirement savings vehicle, Mr. Ramthun recommends contributing to both a 401(k) and HSA, especially if your employer offers a match for either.

“Advisers are now asking the question: Where do you put the money, 401(k) or HSA?” said Steve Christenson, executive vice president at Ascensus, a retirement and college savings service provider. “They’re seeing more of a balance amongst consumers.”

To make the most of both, research if your employer offers matches. If your employer also offers an HSA match, Mr. Ramthun recommends prioritizing that contribution, as you’ll eventually be able to reap greater benefits from the HSA’s triple tax advantages. From there, contribute to your 401(k), and if your employer also offers a match there and you’re taking advantage of it, you’ll be benefiting from both savings plans.

The HSA contribution limits for 2020 are $3,550 for an individual with a high deductible health plan and $7,100 for an individual with family coverage. The catch-up contribution amount for those 55 years old or above is an additional $1,000. The amount contributed to an HSA doesn’t affect the contribution limits for 401(k) plans or IRAs, which are $19,500 and $6,000 respectively for 2020.

One approach to the HSA is to consider paying for current medical expenses out-of-pocket after establishing the HSA; you can then file for reimbursement in retirement. This way, you can supplement your retirement income—entirely tax-free.

If you’re taking this approach, you should make sure you invest your HSA balance in a diversified portfolio, so you can maximize its potential return. According to 2019 data from Ascensus, less than a third of HSA account holders eligible to invest their funds actually did so.

Meanwhile, keep track of the medical expenses you pay out of pocket. Keeping these receipts on hand means you can then file during retirement to have them reimbursed. But remember: You have to keep the receipts from any medical expenses you paid for out-of-pocket before retirement, just in case the IRS ever comes knocking for an audit.

An HSA can also be considered as a “rainy day” medical fund that works in tandem with your 401(k) to help offset the cost of out-of-network care, over-the-counter medicines or other things your insurance may not cover. Even if you’re healthy now, studies show you could still be spending much more on medical expenses once you enter retirement.

Remember: You can’t keep contributing to your HSA once you’re enrolled in Medicare. So maximizing contributions now will allow the miracle of compounding to work, growing that money in your HSA over time.

“Everything about retirement planning says, ‘Start young, be regular and invest,’” Mr. Ramthun said. “That’s what we want people to hear about HSAs.”

How HSAs May Help Women Clear Retirement Savings Obstacles

Throughout the ages, women have grown adept at doing more with less. It’s a skill that will stand many of today’s women in good stead when it comes to retirement savings.

Compared with men, women generally earn less, take more career breaks and live longer, so it stands to reason that they need more income — not only for general living expenses, but to pay for additional healthcare associated with aging. Women who reached age 65 in 2016 are expected to live almost three years longer than men, according to the Social Security Administration. What’s more, a recent study claims that by age 65, a woman will need to have saved $161,000 — compared to a man’s $148,000 — to cover healthcare costs in retirement.

It all adds up to an inescapable, if frustrating, conclusion: If women want to sustain a secure lifestyle during their retirement years, they’ve got to save more.

The good news is that there are ways for them to boost their retirement readiness through a number of methods. One that’s often overlooked is incorporating a health savings account into their savings strategy early on. HSAs’ unique features can help women supplement traditional retirement income via employer-sponsored retirement plans, IRAs and Social Security, and can help to overcome some of their savings obstacles, too.


Bridging the 18% gap

Women’s salaries, on average, are 82% of men’s, according to a recent Bureau of Labor Statistics report, and this 18% gap may mean less money available to put toward retirement each year. While an HSA might not close the pay gap, it can help a woman’s money go further. HSAs offer unparalleled tax benefits. The “triple tax advantage,” as it is known, allows tax-deductible contributions, tax-deferred earnings and tax-free distributions for qualified medical expenses. (See IRS Publication 502, Medical and Dental Expenses, for a partial list of qualified medical expenses.) These tax savings can free up money to save or spend elsewhere, while the unused contributions can be saved for retirement. HSA assets can pay for qualified medical expenses, but they don’t have to be used at all. Unlike a health flexible spending arrangement (FSA), an HSA is not subject to a “use-it-or-lose-it” rule; balances are carried forward from year to year — even into retirement.


Turning career breaks into savings breaks

Most workplace retirement plans require ongoing employment in order to save, which can mean fewer opportunities for women, who tend to take career breaks more often than men. But with an HSA, women can remain eligible to contribute to an HSA even while they are not working. For example, if a woman is covered by her spouse’s HSA-eligible, high-deductible health plan, she may continue to put money into her HSA, up to the annual limit. This means her HSA can keep growing even during a career break.


HSAs in retirement

An HSA can lessen the burden of higher healthcare costs and can be used as supplemental income. While women cannot contribute to an HSA once they are enrolled in Medicare, they can still keep using HSA assets during retirement.

Sure, HSA assets can be used to pay for qualified medical expenses — including Medicare premiums and certain qualified long-term care expenses — instead of dipping into retirement plans or IRAs. But once a woman reaches age 65, she can take HSA distributions for any reason without penalty (although she will pay taxes on those distributions that are not qualified medical expenses).

With so many savings obstacles lined up against them, women in the workforce need to have a plan to meet their retirement savings goals. While every individual’s strategy will be different, one thing is certain: for women, making HSA savings a priority now could pay off in the future.