Fungibility in workplace benefits choices : Evidence from Health Savings Accounts

Workplace benefits now comprise roughly one-third of total employee compensation. At the same time, the choice of benefits has grown increasingly complex. Using a novel survey at 15 universities linked with administrative data on retirement accounts, we examine employee decision-making related to Health Savings Accounts. We find that employees do not use HSAs as long-term savings. Employees offset higher HSA contributions from their employer with lower contributions themselves, and the majority of employees do not know how or whether their HSA funds are invested. Employees with financial literacy and liquidity are more likely to treat their HSA as savings, but even most of this group does not. We also find employees heavily discount employer HSA deposits relative to cash and reject that they treat HSA dollars as fungible with health insurance premiums. Our results have implications for workplace benefits and financial education programs