Fidelity Health Savings Account Participants Save More Than Twice as Much in Their 401(k)s

BOSTON, MA, July 25, 2011- Fidelity Investments®, the nation’s number one provider of workplace retirement savings plans and individual retirement accounts (IRAs) , and a leading provider of employer benefits, today released analysis of the positive savings behaviors of its participants with both health savings accounts (HSAs) and defined contribution plans such as 401(k)s. The results were impressive: 401(k) participants with an HSA accrued more than twice as much in their 401(k)s as the average participant. At the end of 2010, Fidelity’s average 401(k) balance was $71,500; but for those participants also contributing to an HSA, the average balance was $170,500, a full 138 percent greater. 

 “HSA participants understand the tax benefits offered over the long haul, so it’s not surprising they are some of the most active savers in tax-advantaged retirement accounts too,” said William Applegate, vice president, Fidelity Investments. “As more employers turn to high deductible health plans to help rein in escalating health insurance costs, they’re also seeking ways to help employees save for future qualified medical expenses. An HSA, like a 401(k), is a benefit that employers can offer workers to help create a culture of saving in the workplace.”

Fidelity’s research uncovered larger average 401(k) balances across all compensation levels of HSA contributors. For example, at the end of 2010, the average 401(k) balance for a participant earning $20,000-$40,000 per year was $19,000. For the same time period, the average 401(k) balance for a participant making HSA contributions was $30,000, 59 percent greater. At the higher compensation level of $100,000-$150,000, the average 401(k) balance at year end 2010 was $159,000. But for a participant also making HSA contributions, his or her average 401(k) balance was $260,000, 64 percent greater.

HSA Participants are Some of the Most Diligent 401(k) Savers

HSA participants on average defer 8.9 percent of their annual salaries to their 401(k) accounts, versus the overall average 401(k) deferral rate of 8.2 percent. More HSA participants increased their 401(k) deferrals than decreased them during their first year in the tax-deferred savings account (19.7 percent vs. 15.4 percent respectively). The trend of HSA participants increasing their 401(k) deferrals more than decreasing them matches what Fidelity has seen in its overall 401(k) population for eight-straight quarters5. And for those HSA participants that decreased their 401(k) deferral in their first year in an HSA, more than 25 percent ended up increasing their deferrals in the subsequent year.

One in Four HSA Participants Saves 90 Percent of the Contributions

In March, Fidelity reported that a quarter of HSA account holders spend less than 10 percent of their annual contributions, allowing the balance to be carried over for future qualified medical expenses. The average annual 401(k) deferral for these active savers is 11 percent, nearly 3 percentage points higher than the overall average 401(k) deferral rate. In addition, while the vast majority of HSA contributions default into cash, this more diligent saving population invests 23.1 percent of their assets in non-cash investments, greater than the 15.1 percent invested by the average HSA contributor.

More Employers Embracing HSAs as an Important Employee Benefit

The number of HSAs grew 27 percent in 2010 for a total of 6.2 million accounts nationwide6. Fidelity’s own HSA business grew 52 percent in 2010. And as plan sponsors look for ways to encourage HSA participation, many provide an employer contribution as an employee benefit, similar to those made to 401(k) plans. Of Fidelity 401(k) plans, 79 percent provide some level of employer contribution to a participant’s retirement account7. Of Fidelity plan sponsors offering HSAs, 83 percent provide some level of employer contribution to a participant’s HSA account.

“There’s no question a significant shift is occurring in the way American employers fund and provide health insurance,” said Applegate. “Providing an HSA with an employer contribution is a workplace benefit that can help employees stay on the right path to retirement, saving for their future qualified medical expenses just like they do for their future income needs in a 401(k).”

HSA Education for Both Employers and Employees

For employers considering high-deductible health plans (HDHPs) and health savings accounts, Fidelity offers educational content at www.fidelity.com/HSA. This site includes educational information, including HSA features and benefits. For employees, Fidelity recently published a Viewpoints article that outlines the potential triple-tax benefits of a HSA and how the product can be integrated into their retirement savings strategy, versus relying on their 401(k) alone.

About Fidelity Investments

Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of more than $3.6 trillion, including managed assets of more than $1.6 trillion, as of June 30, 2011. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.