Top-Level Takeaways
- Everence FCU holds the fifth-highest percentage of health savings accounts in its deposit portfolio of any credit union in the United States.
- Linking a proprietary mutual fund with the HSA allows members to save for expensive healthcare costs while earning money off investments rooted in the credit union’s values.
Health savings accounts comprise approximately 9.6% of the deposit portfolio at Everence Federal Credit Union ($182.8M, Lancaster, PA). That’s the fifth-highest percentage of all credit unions in the United States for the first quarter of 2018.
What makes this product such a large part of Everence’s operations? To begin with, it has an innovative design mixed with what credit union CEO Kent Hartzler calls a new-found legitimization as a long-term savings vehicle.
Design And Distribution
Everence serves individuals, organizations, and congregations that share a belief in the stewardship of resources, a historical biblical belief held by Mennonite Christians, although the credit union’s field of membership is not limited to the church.
“If you are a person who wants to embrace the idea that we should take care of the things we’ve been entrusted with whether time, talent, health, or relationships you can join the credit union,” Hartzler says.
The credit union has designed a number of products and services to help members practice stewardship. One example of this is a 50-basis-point discount on auto loan rates for the finance of a hybrid, electric, or fuel-efficient vehicle. Another example is the credit union’s proprietary investment HSA that pairs the transactional element of a traditional health savings account with the option to invest funds in a suite of socially responsible mutual funds held and managed by the Everence Trust Company, with which the credit union has a custodial relationship.
“There are some offerings like this out there, but you’d have to find a big institution or one specialized in this sort of thing,” Hartzler says.
According to Hartzler, Everence pays 25 basis points on HSA deposits between $3,000-$25,000 and 35 basis points on deposits greater than $25,000, although Hartzler anticipates that will increase before the summer ends.
For $3 per month, however, members can opt in to an add-on service where they can invest part of their account balance in the credit union’s socially responsible mutual funds, which offers depositors a potentially greater return (click here to view performance data). There is no cost to transfer funds and no transactional limits. Account contributions are tax deductible, withdrawals to pay for qualified medical expenses are tax free, and earnings are tax free. What’s more, Hartzler finds HSAs to be a particularly sticky deposit product.
Through its family of companies, as well as its 2009 merger with an insurance provider, Everence has healthcare advisors that sell healthcare plans to small businesses and larger companies and package the credit union’s HSA accounts into their plan designs.
Because of the close connection and high-deductible healthcare plans of members, interest in the HSA and mutual fund products has been strong. But, even more independent credit unions can take advantage of the opportunity in health savings accounts.
“If we didn’t have this relationship, then I would be looking toward my local providers” Hartzler says. “I’d connect with companies that sell high-deductible plans. If they are selling a high-deductible health plan, that plan needs an HSA.”
Legitimizing The HSA
A 2017 study from the Kaiser Family Foundation found deductibles and other out-of-pocket expenses have risen steadily over the past decade for workers with employer-sponsored insurance. The average amount enrollees paid toward their deductible rose from $117 to $386 a full 229% between 2005 and 2015. A separate report from Kaiser determined the average deductible for people with employer coverage rose from $303 to $1,505 between 2006 and 2017.
“More companies are trying to manage their benefits costs,” Hartzler says. “Offering high-deductible healthcare plans is one way to do that.”
According to the CEO, health savings accounts offer a way for people facing high-deductible payments to save money and earn interest until they incur costs. HSAs also help members avoid playing the odds against their insurance costs.
“If you pay a premium, then it’s spent whether or not you have a claim,” Hartzler says. “With this, the money stays with the accountholder and grows.”
Increasingly, Hartzler is seeing members with HSA balances of $15,000 or more. Those are cases in which members might move some money into the socially responsible mutual funds with the goal of earning more than the rate offered on the HSA deposit product.
Hartzler concedes not every individual or family is in a financial position to invest in the mutual funds. But for the average member, it would be a relief to have enough put aside to cover a year’s worth of deductible costs and also be able to tuck away extra for a rainy day.
“American’s need to save more money,” the CEO says. “With this, they can start to see the compounding affects.”