#2: Employees who are nearing retirement

Employees who are close to or considering retiring are at a unique time in their lives as well as their careers. While there is tremendous excitement about what lies ahead, there could also be a great deal of uncertainty as to how prepared they are financially. For employers, focusing on the needs of these employees at this stage of their career is just as important as doing so at any other stage of their professional journey.

Encourage employees to consider catch-up contributions. Let's face it, as people age, they're more likely to have additional medical needs and higher medical costs. Making catch-up contributions to an HSA is a great way for employees age 55 or older to set aside even more money to pay for medical expenses now or in retirement. Employees age 55 or older can make an additional $1,000 catch-up contribution over the IRS annual limits, which are $3,850 for a single person and $7,750 for families in 2023.
Tell employees they must take action before they are enrolled in Medicare. Medicare enrollees are no longer eligible to contribute to an HSA, and employees who continue to contribute to an HSA when they're not eligible face tax and financial penalties. To reduce the risk of these penalties, the Centers for Medicare & Medicaid Services and the IRS suggest employees stop contributing to their HSAs before they turn age 65 or more than six months before they enroll in Medicare if they are delaying Medicare enrollment until after age 65.
Reinforce the ways they can use their HSA balance. The money in employees' HSAs is theirs to keep. These funds can be used tax-free for eligible medical expenses, which now can include Medicare premiums and out-of-pocket costs, as well as certain other health expenses. However, once people reach age 65, HSAs allow money to be withdrawn for non-health care expenses as well, without a penalty, but those expenses will be subject to income tax.

Related: The HSA: A retirement benefit in disguise?

It's important to communicate the benefits of an HSA to employees, but this shouldn't be a one-size-fits-all strategy. While first-time hires may not fully understand the concepts of HSAs and saving for retirement, it's important for them to consider the importance of developing good savings strategies early in their career. For those nearing retirement, a completely different set of concerns means talking about how they can use their funds, which are theirs to keep, and what rules go into effect when they become eligible for Medicare.

Instant Insights /

Entry-level employees or pre-retirees? The right HSA messaging is key

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