Empower Retirement announced Tuesday that this summer it would begin providing health savings accounts to participants in plans for which it is record keeper thanks to a partnership with HSA provider Optum.
“You can’t plan for retirement without taking into consideration health-care costs,” said Edmund F. Murphy III, president of Empower Retirement, in an interview. “Clients want a more holistic view.”
Mr. Murphy said Empower will begin offering its health savings accounts in the summer to all sponsor clients through the five-year deal with Optum.
According to Pensions & Investment data, Empower ranked third in assets among record keepers as of Sept. 30, with $442.5 billion and second in participants with 7.93 million. It ranked eighth among sponsors with 36,191 clients.
Among the largest record keepers, only Fidelity Investments and Bank of America/Merrill Lynch offer their own HSAs.
HSAs are tax-advantaged savings accounts linked to high-deductible health plans. HSAs offer a triple tax advantage: Contributions to the HSA are made with pretax dollars; earnings and interestwithin the HSA accumulate tax-free; and withdrawals for qualified medical expenses are tax-free.
Although HSAs have grown over the years, the investment component remains small. Last year, total HSA assets were $37 billion, of which $5.5 billion was invested, according to Devenir Group, an investment adviser and consultant in the HSA industry. Devenir tracks results from the 100 largest HSA providers. It predicts total HSA assets for 2017 of $44.5 billion, of which $6.9 billion would be invested. Mr. Murphy said the overall growth of HSAs — total assets nearly doubled between 2013 and 2016 — offers an opportunity for Empower especially as more companies move toward high-deductible health-care plans.
Mr. Murphy described its courtship with Optum as one of “mutual interest.”
Optum, a unit of UnitedHealth Group Inc., administers 3.2 million HSA accounts with total balances of $7.8 billion. It has grown via acquisition, including the HSA business of Wells Fargo & Co. last year.
“We bring a deep DNA to consumer health care,” said Deborah Culhane, senior vice president of Optum, said in an interview.
Mr. Murphy said the Empower HSA will include online investment advice and retirement planning information that incorporate participants’ health-care savings so they can better plan for health-care expenses while taking advantage of the HSA tax benefits. The online program also will contain health-care information thus placing health and financial information in a single online source.
Regarding investment options, Mr. Murphy said the Empower HSA will emphasize open architecture. Over time, the investments available in the HSA will mirror what clients have in their defined contribution plans’ investment lineups, but, initially, “we will be taking advantage of what Optum provides,” Mr. Murphy said.
Ms. Culhane said Optum offers a number of investment options to its clients and that Vanguard Group funds are the most prominent.