If you missed a paycheck, how much would that threaten your family’s financial situation? That’s the question that became a reality for hundreds of thousands of federal workers in the most recent government shutdown. Unexpectedly, the shutdown highlighted a massive issue in American life: most working professionals—even federal workers—are living paycheck to paycheck and need every source of financial relief possible to make ends meet.
Two statistics get at the heart of what the government shutdown revealed. A 2018 report from the Federal Reserve found that 4-in-10 Americans couldn’t afford a $400 emergency expense. Meanwhile, 78% of full-time workers said they live paycheck to paycheck, up from 75% in 2016, according to a 2017 report from CareerBuilder. It seems that no matter how hard Americans work, they can’t seem to get ahead.
If you could give employees an option that would help them save $1,000 or more each year, reduce their taxable income, and help cover medical expenses, it seems like a simple decision. Flexible spending accounts (FSAs) and health savings accounts (HSAs) provide these tangible benefits to working professionals and families, but not everyone with access to these accounts has taken advantage of them. In 2018, 63% of employers offered an FSA (SHRM), but only 1-in-5 Americans chose to enroll in one (TheStreet). Why aren’t more Americans signing up during open enrollment when these accounts can do so much to benefit their wallets every day?
After all, these accounts offer tangible value. Consider that a family making the median income ($59,000) that sets aside the full FSA allocation for 2019 ($2,700) can save nearly $1,000 annually.
Help Employees Bridge a Widening Gap
Consumer-directed healthcare accounts like FSAs and HSAs are powerful financial tools, but their benefits—and most importantly, how to use them—have historically been poorly communicated to employees. Additionally, due to the complexities about what’s considered “eligible” to purchase with pretax health funds, it was nearly impossible for consumers to know what they could buy. And if they ever had a question about their account or eligibility, there were few places to turn. Through this family of sites, consumers are benefitting from increased transparency in product eligibility, reducing forfeiture of funds through education, and maximizing pretax benefits through online calculators and interactive tools.
Benefits success starts with the people who are directly responsible for creating and administering spending accounts on behalf of businesses. Human resource professionals are a leading force in this.
Communicate the Benefits
HR plays a significant role in communicating the importance of pretax healthcare accounts and wellness benefits with the same passion as 401(k)s and health plans. Even though these benefits are optional, by choosing not to enroll, employees are missing out on an easy opportunity to save money on expected expenses.
Following are several core communication strategies that Third Party Administrators and HR professionals can use to bolster employee enrollment in spending accounts and wellness program benefits.
- Emphasize annual savings: In most benefits portals, employees will make an enrollment determination based on how much it will affect each paycheck, as opposed to a long-term view or annual savings. There are a multitude of free, online tools that can illustrate an employee’s yearly tax savings for benefits options that can be found with a quick google search. Whether you’re offering a long-term benefit like an HSA or a short-term gain through wellness incentives, providing a frame of reference for yearly savings can help employees see these benefits more clearly.
- Use your wellness program as an introductory first step: In many cases, the first interaction most people have with consumer health care is through workplace wellness programs, some of which pay out pretax dollars for completing certain wellness activities. As you structure your benefits package and communication, think of these programs as a powerful complement to traditional benefit offerings.
The current health system is believed to be focused on fixing existing medical problems rather than on preventive health and discounting the ability or inclination of consumers to control their own health. Where FSAs and HSAs can seem daunting, wellness programs usually aren’t, so this is a good first step to bolster consumer healthcare enrollment. It can also be a big money saver for any size company: More than 90% of employers offer employees wellness benefits usually consisting of education, risk assessment, smoking cessation, and other features. The return on investment (ROI) for these programs can exceed 3:1 if designed to improve employee lifestyle and to avoid risky behaviors. (The Keckley Report).
- Showcase consumer-friendly technology: Using an FSA in the past used to be difficult. But technology has solved many issues that affected employees and benefits professionals. For instance, FSA debit cards give consumers a point-of-sale payment option, reduce the need for substantiation of paper claims, and decrease the time HR teams spend helping employees submit claims. And other common employee issues, such as deadlines, confusing language, and product eligibility questions all have easy answers. Take advantage of employee-facing technology because there is usually an online resource you can offer to your workforce.
- Don’t forget about retirement: In the case of HSAs, where funds roll over year-to-year and can be withdrawn without a tax penalty for nonmedical expenses after age 65, employees should be aware of how HSAs can supplement retirement savings. More than ever, employee benefits are about planning for the future. Show employees how these benefits, large and small, can bolster their savings and support personal and financial wellness down the road.
As the workforce continues to evolve and employers rethink traditional workplace benefits, it’s becoming clear that it’s not enough to just deliver the trendiest benefits. You need to serve the employee’s bottom line. This starts with clear and concise communication, honesty, and respect for the unique nature of each employee’s financial situation. In other words, find surefire ways to help employees benefit better.
Rida Wong is the Chief Strategy Officer at Health-E Commerce where she leads strategic initiatives and new business ventures. Wong has over nearly 20 years of corporate development and investment banking experience at American Express Oppenheimer, GE Merchant Bank, and Wit Soundview Technology Group. She has had FSA and HSA accounts since 2002 and understands the confusion as well as the tax benefits first hand.