Pub. 8 2018-2019 Issue 2

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S September • October 2018 17 A recent article published by the Journal of Financial Planning 4 indicates that most employees are better off deferring to their HSA first in order to cover the current year’s potential expenses. When saving for retirement, an his- torically accepted principle has been to contribute (or work up to contributing) the minimum amount necessary to ob- tain full employer matching dollars in a retirement plan. Hence the phrase “it’s free money”. But as consumers begin incurring major health care expenses, they’ll start connecting the dots between these unexpected expenses and their overall retirement needs. They’ll quickly realize that their need for more substan- tial retirement savings is critical. They’ll also start thinking of where to place their payroll deferrals, which could create a possible competition between retirement plan deferrals andHSA deferrals. “Where should I invest my money?” is a question that more employees will be asking of their employers and of their advisors. Consumer Habits A study conducted by Alegeus out- lined that what consumers believe and what they do can be vastly different when it comes to understanding how to cover expenses for current and future healthcare needs. According to Alegeus’ research, 51 percent of the respondents fear unexpected healthcare expenses near-term. In addition, 68 percent believe themselves to be in the saver category (described earlier) where they focus on carrying forward HSA assets year after year. The reality is that only 23 percent of consumers save anything beyond the current year and more than 50 percent underfund their healthcare savings. What is perhaps the most disheartening statistic from the Alegeus survey is that 70 percent of the participants could not pass a basic HSA knowledge test. The New Challenge Those of us who assist employers and their employees through retirement and health care planning are facing a new challenge. A recent article published by the Journal of Financial Planning 4 indicates that most employees are better off deferring to their HSA first in order to cover the current year’s potential expenses. Employees should then begin deferring in their 401(k) plan and work toward maximizing the employer match. The study emphasizes that deferred dol- lars used for qualified medical expenses are tax-exempt and can provide an imme- diate benefit if needed. After the employer match is achieved, then employees should begin planning where the next dollars deferred are best served. Remaining Competitive Whether you work in a bank or credit union serving local employers or em- ployees, or you’re an advisor seeking to strengthen your role with an employer, it is critical to understand that the environ- ment is requiring a stronger knowledge of the role in health care—both near- and long-term—when employees are seeking answers on where to place those precious deferral dollars. You and your teams will need to understand this new balance in order to remain competitive. n 1 Devenir Research – “2017 Year-End HSA Market Statistics & Trends”, February 22, 2018. http://www. devenir.com/wp-content/uploads/2017-Year-End-Deve - nir-HSA-Market-Research-Report-Executive-Summary.pdf 2 ConnectYourCare – “2018 Trends Report Reveals HSA, FSA, and HRA analytics”, February 20, 2018. https:// www.connectyourcare.com/news-post/employees-con - cern-covering-health-care-costs-retirement-intensifying/ 3 2017 Alegeus Healthcare; State of Denial https:// www.alegeus.com/insights/research-reports/2017- alegeus-state-of-denial-research-report 4 Greg Geisler, “Could a Health Savings Account Be Better than an Employer-Matched 401(k)?”, Journal of Financial Planning, https://www.onefpa.org/journal/ Pages/JAN16-Could-a-Health-Savings-Account-Be- Better-than-an-Employer-Matched-401%28k%29.aspx Carrie Horn is a Consultant with the ERISA Compliance Department at Ascensus. In her position, Ms. Horn serves as an instructor for Ascensus seminars, workshops, conferences, and institutes, as well as seminars for specific associations and finan - cial organizations upon request. Ms. Horn also performs compliance reviews of IRA trust - ees’ and custodians’ IRA departments, which include assessments of internal controls and procedures, and compliance reviews of IRA documentation, tax report - ing, and tax withholding. Ms. Horn is also one of the primary drafters of IRA and qualified retirement plan forms and documents that Ascensus makes available to financial organizations. Ms. Horn is a graduate of Minnesota State University, Moorhead, with a Bachelor of Science degree in ac - counting. She has received the designation of Certified IRA Services Professional (CISP) from the Institute of Certified Bankers (ICB), and currently sits on the ICB’s CISP Advisory Board. Ms. Horn has also earned the designations of Qualified Pension Administrator (QPA) and Tax-Exempt and Governmental Plan Con - sultant (TGPC) from the American Society of Pension Professionals & Actuaries (ASPPA). She has been with Ascensus since 1994. Ascensus helps more than 7 million Americans save for the future—retirement, college, and healthcare— through service and technology solutions. With more than 35 years of experience, the firm offers tailored solutions that meet the needs of banks, credit unions, states, governments, financial professionals, employ - ers, and individuals. Ascensus supports over 50,000 retirement plans, more than 4 million 529 college savings accounts, and a growing number of ABLE savings accounts. It also administers more than 1.5 million IRAs and health savings accounts. For more information about Ascensus, visit www.ascensus.com .