About HSAsHSAs are tax-advantaged medical savings vehicles that can be used to pay for or reimburse eligible medical costs for accountholders, their spouses, and their tax dependents. HSA contributions are tax-free or tax-deductible, account balances grow tax-free, and withdrawals for eligible medical expenses are also tax-free. This triple tax benefit makes HSAs an ideal investment vehicle for retirement healthcare costs.

HSAs can be a powerful way to grow wealth for retirement medical expenses, yet more than 80%* of all HSA assets are held in low-interest cash accounts. Many HSA accountholders use their HSAs to pay for current medical expenses and do not take advantage of the opportunity to invest their HSA savings in longer-term investment solutions. Additionally, many HSA providers require accountholders to maintain cash balances in order to invest their HSA savings, which may dissuade people from taking advantage of available investment options.

SummaryFor more than 35 years, Dimensional Fund Advisors has been putting financial science to work by translating financial research into real-world investment solutions. Dimensional worked with HealthSavings Administrators to provide a health savings account (HSA) investment solution and educate its employees on why investment HSAs can be a valuable part of a comprehensive retirement strategy.

Through first-dollar investment HSAs and consistent employee education, HealthSavings helped Dimensional:

Expand the number of employees investing HSA funds

Increase the amount of invested HSA funds

Dimensional wanted to reframe HSAs as a component

of a comprehensive retirement investment

strategy, instead of being perceived as a way to pay

current medical costs.

Investing In A Healthier FutureDimensional Fund Advisors teams up with HealthSavings to launch a new health savings account (HSA) plan to help their employees prepare for retirement medical expenses

Today, it is estimated that a couple retiring at 65 in 2018 may be liable on average for up to $404,0001 of medical expenses in retirement that currently are not covered by Medicare. If retirees pay these costs from their 401(k)s and other tax qualified plans, they could end up paying over $538,0002 once taxes are factored in. By paying with tax-free HSA funds, they may be able to save as much as $134,000.

1

2

Investing In A Healthier Future

ChallengeBefore Dimensional worked with HealthSavings, their HSA offering required that employees

maintain a $1,000 cash balance prior to investing their savings. At that time, only 14% of employees with HSAs had sufficient account balances to be able to invest, and approximately

5% of employees with HSAs chose to do so. Dimensional was concerned that

employees may not be acquainted with the benefits an HSA offered for long-term investing.

Dimensional wanted to reframe HSAs as a component of a comprehensive retirement investment strategy, instead of being perceived as a way to pay current medical costs. To do that, Dimensional wanted an HSA that did not require a minimum cash balance prior to investing. They also were interested in working with an HSA provider who would offer targeted education to their employees about the potential benefits of HSAs for retirement planning and medical expenses.

ObjectivesDimensional’s goals:

Expand the number of employees investing their HSAs

Increase the percentage of HSA accounts selecting an investment option rather than the funds being kept in a cash account

To meet these goals, Dimensional and HealthSavings designed a two-step program to eliminate HSA investment barriers and to provide employees with ongoing HSA education about the power of saving and investing.

HSAs can be a powerful way to grow wealth for retirement medical expenses, yet more than 80%* of all HSA assets are held in low-interest cash accounts.

1

2

Investing In A Healthier Future

Solution Removing HSA Investment Barriers

HealthSavings offers first-dollar HSA investing to its clients, which made it a natural fit for Dimensional’s objectives. To start, Dimensional paired the new HealthSavings HSA with their previous HSA option and gave employees the choice to continue with their existing HSA or transfer their HSA account to the HealthSavings HSA free of charge. In the first six months, half of Dimensional’s employees with HSA accounts had transferred their accounts to the HealthSavings HSA.

Solid and Ongoing HSA Education

Often, HSAs are mentioned along with other listed benefits in open enrollment meetings and then not brought up to employees until the next enrollment period. To help Dimensional employees best understand their new HSA option, Dimensional and HealthSavings provided multiple informational touchpoints over an extended time frame. The goal was to give employees the time and information they needed to make a fully informed decision.

The following year, Dimensional held employee meetings to highlight the HSA option. After the new HSA had been available for more than a year, Dimensional took the final step of migrating all HSA accountholders to the new HSA. Today, all new employees who meet HSA eligibility requirements are automatically offered the HealthSavings HSA.

The first touchpoints were hour-long, HSA-focused meetings where experts from HealthSavings and an insurance provider explained HSAs’ costs and benefits, as well as HSA logistics and regulations. HealthSavings created a custom presentation for these meetings, as well as a series of infographics that employees could share with family members. Dimensional held multiple meetings at different times to permit employees to attend.

An article emphasizing the investment potential of HSAs, “Health Savings Accounts: New Tool For Retirement,” was circulated for those employees who did not attend a meeting. In addition, HealthSavings created a short video illustrating the concept of “shoeboxing,” or paying out-of-pocket for eligible medical expenses and keeping the receipts, then reimbursing these costs down the road once HSA funds have grown. “Shoeboxing” allows HSA accountholders to withdraw tax-free funds to reimburse prior qualified medical expenses and spend these funds with no tax penalty.

Initial Meetings

Additional Resources

Automatic HSA Migration

“Our HSA plan is now used by almost 90% of our employees covered under our medical

insurance. Our high savings and investing rate are strong signs that our employees are taking advantage of this vehicle as part of their overall

retirement planning.”

- Aaron Marcus, Head of Global Human Resources for Dimensional Fund Advisors

About HealthSavingsHealthSavings empowers consumer-driven health plan participants to invest all their health benefit dollars in institutional-class funds so they can grow their savings tax-free and meet their financial goals for a happy, healthy future. By choosing from a carefully curated selection of funds with lower expense ratios and no trading fees, HealthSavings accountholders have historically saved five times more than the industry average. Visit HealthSavings.com to learn more.

Find out how we can create an HSA solution for your organization. Call us at (888) 354-0697 or visit www.HealthSavings.com.

Sources:* 2018 Year-End Devenir HSA Research Report1 HealthView Services 2017 Retirement Health Care Costs Data Report2 This calculation is based on a 25% federal and state tax rate

As a result of these efforts, Dimensional has seen healthy increases in the number of employees with HSAs and the number of HSA balances that are invested:

RESULTS

The percentage of eligible employees who were investing at least a portion of their HSA funds increased by 6x (from 5% to 30%).

The percentage of HSA funds invested increased by approximately 4x (from an estimated 20% to 78%).

Over 75% of employees’ HSA funds were invested (nearly 4x higher than the industry average).*

The average employee’s HSA balance was over $6,000 (nearly 3x higher than the industry average account balance).*

Investing In A Healthier Future

45% of the employees with

HSAs had not withdrawn any

money in the past 12 months

(building a foundation of saving

and investing their HSAs)