Since the inception of the employer-employee relationship there has been employee turnover. Every employer knows that turnover is inevitable and have factored in the costs into the price of doing business.
One way to lengthen tenure among your workforce is an effective health and wealth strategy, which introduces a long-term partnership where both employers and employees are mutually invested in growing wealth and improving health through knowledge, savings and investing.
Healthcare costs continue to grow year over year. The amount a retired couple will need to cover just medical expenses in retirement is up to $321,994 in today’s dollars ($485,246 in future dollars). Employees can have a viable option for a comfortable living in retirement if they work in partnership with their employer.
Here’s the reality of the situation: when your employees retire they’ll need to have close to $500,000 or more saved, depending upon their age, just for healthcare expenses. Here’s a few questions to ask:
- Do your employees have that amount saved now?
- How far off target are they?
- What is their plan to get on track?
Ask these tough questions about retirement savings in a tax deferred account for living expenses:
- Do they have a retirement plan in place?
- Are they on track with that retirement plan?
- What do they need to do to get on track?
The bottom line is, most people don’t have a plan, they’re not on track and they don’t even know what they need to do to get on track. 25 to 35 years until retirement seems too far away to even care. According to Indeed.com, the top reason employees change companies, 41.2% said it was “due to compensation and benefits.” Employers can take a lesson from this data in the context of the potential long-term relationship with employees.
Matching HSA and 401(k) Contributions
The end goal is to help your employees save in both their HSA and their 401(k). A few effective ways to incentivize employees to make contributions include making seed contributions into HSA and then 401(k), as well as matching their contributions into each account. Matching employees who participate in funding their own HSA and 401(k) increases their ability to save for future.
HSA employee contributions made through payroll are pre-tax, meaning they don’t pay any payroll tax, FUTA, SUTA and FICA. As the employer, your contributions and match into your employee’s HSA is also exempt from all payroll taxes, whereas any 401(k) contribution are not exempt from FICA. If employees choose not to make contributions, they miss out on the benefit of the matching contribution and are in effect, leaving money on the table. Studies have shown that employers who offer matching benefits have higher savings rates than those who do not.
A health and wealth strategy instituted within your organization can have long-term lasting effects that benefit you and your employees. Understanding their needs, meeting those needs and empowering them with funding and matching strategies are some great strides toward a long-term partnership aimed at lowering turnover and improving the health and financial well-being of your current and future employees.
To learn more about how to take advantage of the many other benefits that HSAs provide, visit www.healthequity.com/HSAlearn.
1 HSAs are never taxed at a federal income tax level when used appropriately for qualified medical expenses. Also, most states recognize HSA funds as tax-free with very few exceptions. Please consult a tax advisor regarding your state’s specific rules.
2 Investments available to HSA holders are subject to risk, including the possible loss of the principal invested and are not FDIC insured or guaranteed by HealthEquity, Inc.
HealthEquity does not provide legal, tax, financial or medical advice.
Nothing in this communication is intended as legal, tax, financial, or medical advice. Always consult a professional when making life-changing decisions.