Employees want more than traditional benefits to combat financial stress

What’s causing stress?

• Money concerns in general cause a significantly higher toll on mental health, especially among younger Gen Z workers (those born between 1997 and 2012) just starting their careers and millennials (1981-1996), in their late 20s to early 40s whose careers paths are still evolving.
• Nearly half of baby boomers (45%) and Gen X (47%) were concerned that they’re not financially prepared to retire.
• Nearly 25% of respondents say their finances inhibit their ability to pay for prescription medications and 15% admit they’ve taken on debt to cover health care emergencies.
• One quarter of respondents admit they often rely on resources outside their employer to make decisions about their health care plan and benefits.
• Forty-two percent of employees are likely to change employers due to improved benefits, with this number higher among those in Gen Z (54%) and millennials (49%).

How can employers help?

At a time when benefits expectations are broadening beyond health plans and retirement, benefit administrators have a key role to provide the proper engagement strategies and educational resources. They can position themselves as a trusted source of information to help employees make confident benefits decisions.

Employers can also help alleviate these problems by offering Health Savings Accounts (HSAs) and other compatible benefits such as Flexible Spending Accounts (FSAs) and Emergency Savings Accounts (ESAs) to help employees plan and save for expenses and reduce financial stress.

HSAs and FSAs

HSAs, which allow workers to set aside pre-tax dollars for medical expenses through payroll deduction, can alleviate some of the stress of going into debt to pay for health care expenses since funds can be invested for the future and cover qualified expenses during retirement. Any gains are tax free and distributions for approved expenses are also tax free.

Tax-advantaged HSAs have steadily grown over the years as more employers move to the high-deductible health plans (HDHPs) that lower premiums for them and their employees. According to the Bureau of Labor Statistics, 50% of workers were offered HDHPs in 2024 as compared to 38% in 2014. HSAs, which can be paired with qualified HDHPs, have grown as well; 58% of employers with 500 or more workers offered HSA plans in 2024, up from 36% in 2015, according to the Bureau.

Where employers can make an impact is by offering contributions to HSAs. The HSA Bank Health & Wealth Index found that 85%of respondents’ employers offered HSA matching contributions and, while this is the most reported type, there are multiple ways employers can contribute to employee HSAs including seeding the accounts with an initial contribution at the beginning of the year, making periodic contributions throughout the year and by offering wellness incentives. In fact, over half of employees (52%) claimed they would be more likely to enroll in an HDHP with an HSA if their employer offered an initial or matching contribution and 14% of employees cited wellness incentives as a desired way for employers to help with their health care expenses.

Similar to HSAs, FSAs are funded through pretax paycheck deductions but usually without employer matching. For employees, they can be helpful in paying for eligible health care expenses by supplementing an HSA, in the case of a Limited Purpose FSA (LP-FSA). Employees do not have to pay federal or FICA taxes on the money they put into their accounts, and many state taxes are also exempt. Employers also benefit through lower payroll taxes.

How to help employees with emergencies

Our research also found employees identified employer support with financial emergencies as one of the most important aspects in how they perceive employers. However, only 26% strongly agree that their employer adequately supports them with emergency expenses, and only 8% of respondents said that their employers offer an ESA.

An ESA is an employee-owned bank account specifically meant for unplanned expenses or financial emergencies that can be integrated with payroll deductions. Employers can create added incentives to save by matching employee contributions.

Since ESAs were the least reported benefit offered, employers can help fill a major employee need while adding what employees cited as the most attractive new benefit, giving employers that offer it a competitive advantage in attracting and retaining talent.

Cover unique expenses with a Lifestyle Spending Account

Lifestyle Spending Accounts (LSAs) are post-tax reimbursement accounts that employers fund to cover a wide variety of non-traditional benefit plan expenses that fit employees’ unique needs and support physical, mental and financial wellbeing, from home office furnishings and gym memberships to mental health counseling and elder care.

LSAs give employers an opportunity to improve relationships with employees, and encourage healthy, active lifestyles. They also give employees a sense of control over how they manage their own health and wellness.

For the employer, LSAs can represent a business expense tax deduction, and it increases compensation without increasing base pay. Unlike HSAs or FSAs, the IRS doesn’t regulate them. The amount an employee withdraws, however, is subject to federal and state income taxes.

Insights and actions

Going above the standard by funding employee benefits accounts such as LSAs, FSAs and ESAs can lead to reduced stress and turnover and enhance employee perceptions of the organization.

With the right plan options and understanding of what benefits will work for them, employees can choose the right path to maximize their financial and physical health and feel secure, valued and ready to thrive.

Kevin Robertson is Executive Managing Director, Chief Revenue Officer of HSA Bank.