HSAs Grew in 2020, but Few Users Invest Their Balances: EBRI

The average health savings account balance increased by more than one-third in 2020, according to a recent study from the Employee Benefit Research Institute that examines how HSA holders contribute to, withdraw from and invest in their HSAs.

The average balance increase was even larger when the analysis focused only on accounts that had received either an employee or employer contribution — up to 50% for the year.

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EBRI explained that this had mainly to do with a majority of account holders either not taking a distribution in 2020 or taking one smaller than $500, a decrease from 2019.

The study encompasses the 11.4 million HSAs in EBRI's HSA Database that were open for at least part of 2020, up from 10.5 million open accounts in 2019, and accounting for about 40% of the market.

Assets contained within accounts captured by EBRI's database grew to $32.9 billion, up from $28.1 billion in 2019.

Age and Tenure

EBRI found that the older the account holder, the higher the average HSA balance.

It noted that older workers tend to earn more than younger workers and to have a longer account tenure, which helps them accumulate larger balances and acquire more experience with managing and understanding how HSAs fit into their finances.

Moreover, older workers are more likely than younger ones to incur larger health care expenses — an incentive to build up HSA balances.

According to the report, account tenure is strongly associated with higher account balances, as longer-held accounts receive more contributions from both workers and employers.

Although some account holders spend much of their balance each year, most do not, EBRI found. As a result, account holders build up progressively higher balances year after year.

Suboptimal Investment Behavior

Optimal usage of an HSA from the standpoint of increasing wealth at retirement suggests that account holders maximize their contributions, hold investments other than cash and avoid withdrawing money from their HSAs unless they cannot pay for health care out of pocket.

The study found, however, that few account holders take advantage of the ability to invest HSA assets.

"Plan sponsors and administrators can play a critical role in helping accountholders take a longer view of HSAs and the role they can play in their financial wellness," EBRI research associate Jake Spiegel said in a statement.

"By fostering employee engagement with HSAs and providing a contribution to their employees accounts, employers can help nudge their employees toward more optimal usage of HSAs."