A Health Savings Account (HSA) is a savings account that allows account holders to put aside money pre-tax to pay for future qualified medical expenses. Account holders must be enrolled in a high deductible health plan (HDHP).
Why Should More Credit Unions Offer HSAs?
First and foremost, HSAs are a pathway to help credit union members save for future medical expenses and seek the care they need when they need it without the fear of mounting expenses. For credit unions, HSAs can help boost deposit growth.
According to a mid-year 2017 report from investment services advisor Devenir, HSAs accounted for 36% of new accounts opened in the first half of 2017, making these accounts the leading driver of new account growth. The HSA expert projects HSA assets will top $60 billion among nearly 30 million accounts by the end of 2019.
According to the 5300 Call Report definitions, “Section 724.1 of the NCUA Rules and Regulations permits Federal credit unions to act as trustees and custodians of certain tax-advantaged savings plans.”
Unlike flexible spending accounts, HSAs roll over every year and accumulate funds. Within the credit union industry, HSA balances are steadily growing. In fact, they increased 15.3% year-over-year as of the third quarter 2017.
The industry’s loan-to-share ratio is climbing — it hit 81.3% as of Sept. 30 — and credit unions are looking for new ways to capture shares to meet rising loan demand. The need to build deposits is apparent, and partnering with select employer groups (SEGs) or local businesses to offer HSAs is one way to steadily grow shares.
Although credit unions can offer HSAs to any member with a high-deductible health plan, targeting SEGs is a great way to grow HSA deposits because more than half of all Americans are covered by employment-based insurance, according to a 2015 report by the U.S. Census Bureau. HSAs also represent a stepping stone to establish deeper, long-term relationships with members in various SEGs.