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EMPLOYEE MATTERS: Tax-favored savings accounts help drive wellness program engagement

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By Matt Dunning, Crain News Service

WASHINGTON (Sept. 30, 2013) — While health insurance premium discounts remain the dominant form of financial incentives that employers use to drive engagement in their workplace wellness programs, contributions to employees' tax-favored savings accounts may be more strategically effective, experts say.

Earlier this year, Cleveland-based KeyCorp, the parent company of Key Bank, announced that its wellness incentives for employees and their spouses would be made in the form of contributions to their health savings accounts (HSAs) beginning in 2014.

The company had previously been offering its group health plan members a $600-per-member premium discount for completing certain activities under its "Workforce WellBeing" program. But "I've always said that it's kind of 'funny money,'" Sandy Rosenberg, KeyCorp.'s vice president of employee benefits and absence management, said recently during a panel discussion at the National Business Group on Health's 27th National Conference for Health, Productivity and Human Capital in Washington.

"We told our members in July that the incentive this year will be a contribution to their health savings account," Ms. Rosenberg said. "That's real money going right into their account, so it's a lot more meaningful."

A growing trend

When it makes the transition next year, KeyCorp. will join the 27 percent of large employers using contributions to HSAs, health reimbursement accounts or flexible spending accounts to motivate employees to participate in a workplace wellness program, according to survey data published by the Washington-based National Business Group on Health.

Comparatively, 61 percent of employers surveyed in 2012 were using premium discounts to incentivize participation in their wellness programs, at an average of $521 per employee. In 2013, employers' average per-employee incentive spending rose to $649.

"That's a very significant number if it's real dollars," Dee Edington, founder and chairman of the Ann Arbor, Mich.-based wellness research firm Edington Associates L.L.C. said of KeyCorp's $600 premium discount. "If it's funny dollars, then they're just fooling their employees and not being transparent, and a lot of people are doing that."

Mr. Edington said during the panel discussion that he encourages employers sponsoring wellness incentives to transition from premium discounts to tax-favored health or retirement savings account contributions not only for their employees' benefit, but for their own as well.

"Those are the things that American employees really need—to be saving money for health care and saving money for retirement," Mr. Edington said. "The advantage to the employers is that both of those methods will mean a lower payroll tax, so you have both groups—employers and employees—benefiting from the incentive."

This report appeared in Business Insurance magazine, a Chicago-based sister publication of Tire Business.

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