National Retirement Security Month
October 2020

NAGDCA Tip #4:
HSAs and HRAs Are Valuable Retirement Preparedness Vehicles

Lexington, KY, October 19, 2020—Healthcare remains among the largest expenses in retirement—and predominant among employees’ concerns about financial security in their post-work years. National Retirement Security Month, originally conceived as National Retirement Security Week by NAGDCA in 2006, asks employers to make every effort to help Americans take the steps necessary to adequately prepare for their financial security in retirement. NAGDCA is the premier professional association for plan administrators and services providers of government-sponsored defined contribution retirement plans.

“Healthcare is among the top three expenses in retirement and is projected to remain so for the foreseeable future. While many assume Medicare covers all healthcare costs, it doesn’t,” stated NAGDCA Executive Director Matt Petersen. “Providing employees with healthcare-specific savings tools helps them achieve financial wellness during their working years—a key stepping stone to robust retirement preparedness—and helps ensure adequate funds for costs not covered by Medicare once they’re retired. Employer-enabled Health Savings Accounts (HSAs) and employer-provided Health Reimbursement Accounts (HRAs) provide employees with significant savings benefits, and, as such, their use and popularity are growing among both employers and employees.”

Intelligence from a variety of sources attests to the need for employers to help employees prepare for healthcare expenses in retirement and understand their options for doing so:

  • Average medical costs for a couple in retirement are estimated to be $296,000. (EBRI)
  • The estimated potential retirement healthcare savings gap for a couple is $293,157. (Voya Financial)
  • The percentage of household budgets spent on health expenses is nearly 3x as much for retirees on Medicare (14%) as for working households (5%). (Kaiser Family Foundation)
  • Only 2% of Americans are aware of the key attributes of an HSA. (Voya Financial)

Adoption of a high-deductible health plan with savings option (HDHP/SO) continues to grow. The results of the Kaiser Family Foundation 2020 Employer Health Benefits Study reveal:

  • Enrollment in an HDHP/SO increased to 31% in 2020, from 24% in 2015.
  • 26% of employers offering healthcare benefits offer an HDHP/HRA, an HSA-qualified HDHP, or both.
  • Among employers offering healthcare benefits, 20% offer an HSA-qualified HDHP and 8% offer an HDHP/HRA (up from 4% for both in 2005).
  • Of employees with employer-provided healthcare coverage, 24% are enrolled in an HSA-qualified HDHP and 7% are enrolled in an HDHP/HRA.

NAGDCA shares the following insights and guidance on HSAs and HRAs culled from member best practices.

HSAs – HDHP/SO available to individuals with a qualified high-deductible health plan

Employer implementation strategies:

  • Offer an HDHP and HSA alongside traditional health plan options
  • Provide education on the benefits of HDHP and HSA to spur adoption:
    • an HDHP with an HSA may provide better value for those with low utilization of a traditional plan
    • HSAs enable tax-advantaged savings (income and FICA tax free, tax free growth, tax free withdrawal when used to pay for qualified healthcare expenses)
    • HSA funds can serve as supplemental retirement vehicles; no penalty applied to non-healthcare expenses in retirement
  • Incentivize HSA enrollment and ongoing engagement with employer contributions
  • Offer guidance to drive optimal use and results of HDHP and HSA

HRAs – Employer-provided health savings accounts

Employer implementation considerations:

  • Contributions are made solely by employer at employer’s discretion as to funding options, which include:
    • unspent vacation time
    • difference in value between more expensive and less expensive plan offering
    • value of un-used employer-provided coverage
    • early retirement incentive package
    • partial value of COLA
  • Assets are held in a tax-exempt trust vehicle
  • Primary benefits include:
    • balances carry forward annually
    • there are no contribution limits
    • cover both pre- and post-65 healthcare premiums, including Medicare supplements
    • Individual contributions and non-healthcare-related withdrawals are not allowed

Additional NAGDCA-provided resources on HSAs and HRAs include:

At a crossroads: Health and Wealth
Wednesday, October 21 – 2:00-3:00pm ET
This presentation is one of six Learning Labs offered during Connect, NAGDCA’s new virtual engagement and learning series launching in October during National Retirement Security Month. To register for and learn more about Connect, click here.

NAGDCA provides education, information, and training in all aspects of public plan administration to support members in creating plans that enable secure retirement outcomes for their participants. NAGDCA conceived National Retirement Security Week in 2006 to spur a grassroots movement to increase awareness of the need to save adequately for retirement; the effort was extended to National Retirement Security Month in 2020. Senate resolution for the focused awareness-raising effort continues with bipartisan support annually. To learn more about NAGDCA, visit

# # #

Media Contact
Robin Schoen
Robin Schoen Public Relations