Finance & Earnings - Your money

Not much saving going on in Health Savings Accounts


´╗┐Health Savings Accounts feature prominently in the new healthcare bill being considered by the U.S. House of Representatives, with a variety of changes in store. But research shows not many participants are actually saving money beyond the initial tax break. More than 20 million Americans currently have these accounts, which allow people with high-deductible health plans - above $1,300 for an individual or $2,600 for a family - to put aside money for out-of-pocket medical expenses and save leftover funds for future expenses. Contrary to Flexible Spending Accounts, in which you put aside pre-tax dollars and have to spend it all in a year or lose it, there is no yearly expiration for HSAs. The account is yours for good. You get a tax break for your contributions, and if you earn interest or investment growth on your account, that is also tax-free as long as you use the money for qualified expenses. These accounts have sky-rocketed in the last six years, with 85 percent of the accounts opened since 2011, according to the Employee Benefit Research Institute, or EBRI. New research shows how people are using them, which may shed some light on the best way to make changes (bit.ly/2i9suo3). The most prominent takeaway is that there is not actually that much "saving" beyond the tax break in Health Savings Accounts. Money goes in and comes right back out, with only a fraction held over. Here are some other key points analysts have learned:

* Employer contributions matter Want to encourage people to put aside money for their medical expenses? Have an employer start the kitty. The average employer contribution to workplace HSAs is $868, with the average employee contributing $1,786, for a combined yearly total of $2,654. In accounts not associated with a workplace, the average contribution was $1,713, according to Devenir, an HSA research consultant (bit.ly/2mfQnAL). "Any minimal employer contribution - even just $500 - and you've essentially given them the jump start," said Steve Christenson, executive vice president at Ascensus, a retirement and savings plan provider. "When you say 'here are dollars to start with and here's some additional information on how to keep funding it' - those two simple things go a long way."

* Not even close to the maxAmong the propositions of the new healthcare bill is raising the maximum contribution allowed to HSAs, which this year was capped at $3,400 for an individual and $6,750 for a family. The bill proposes to raise that ceiling to be equal to the out-of-pocket maximum for high-deductible plans, which is $6,550 for individuals and $13,100 for families. What we know from current behavior is that just 15 percent contribute the maximum, according to Devenir. More than 30 percent do not contribute any money at all in a given year. * Shrinking savings

Most HSAs are churn accounts, and saving might actually be going down instead of up. Devenir's latest report found participants holding over less in 2016, just $5.7 billion, compared with $5.9 billion in 2015 and $6.2 billion in 2014. A HelloWallet study from 2015 found that nearly 30 percent of HSA participants spent nearly all they contributed in a year (bit.ly/2myF4jD). This is not necessarily a bad thing, as you still get a tax deduction for the contribution, said Paul Fronstin, director of Health Research and Education for EBRI. * Losing to inflationMost of the $37 billion in HSA accounts is sitting in cash, with only $5.5 billion invested in any way, according to Devinir. EBRI's study found that investments made up only about 3 percent of the total deposits. In today's low interest-rate environment, that means these accounts are not keeping up with inflation, and actually losing value over time. "If you think you're going to spend most of the funds, it doesn't make sense to invest it," said Evan Powers, a certified financial planner with Cypress Financial Planning in Charlottesville, Virginia, and an adviser for myfinancialanswers.com. Those who are saving and investing are doing better - they have an average balance of $14,971, seven times larger than those who do not invest. "The missing component is consumer education," said Ascensus' Christenson.

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Sears shares sink as creditors, investors fret over going concern risk


´╗┐Sears Holdings Corp's (SHLD. O) shares slumped 16 percent on Wednesday as bondholders and investors questioned how long the retailer could remain in business, a day after the company flagged going-concern doubts. The disclosure raised concerns over the retailer's ability to restructure its debt load and stock inventory heading into the crucial 2017 holiday season. The drop in the stock, down at $7.64 in midday trade, is the largest one-day percentage decline since a 18.79 percent tumble on Nov. 16, 2012."While I don't think the new disclosure means they will definitely file BK in 2017, it does seem to signal that the next 12 months are even more crucial than has been the case in recent years, as their margin of error is getting slim," said Chad Brand, president of Peridot Capital Management, a Sears bondholder. BK is a shorthand for bankruptcy - a prospect raised after Sears flagged doubts about its ability to stay in business in the "risk factors" section of its annual report."Our historical operating results indicate substantial doubt exists related to the company's ability to continue as a going concern," Sears said in the report. Sears spokesman Howard Reif said the company hopes the actions it is taking will keep it in business. The company, which has $13.19 billion in liabilities, noted that it could have difficulty procuring merchandise from vendors. Bondholders are watching to see whether the company will have the cash and credit needed to stock its shelves for the 2017 holiday season. Retailers typically book orders for merchandise for the vital fourth quarter from now through mid-summer.

Continued operating losses also could restrict access to new funds under its domestic credit agreement, according to the filing. (bit.ly/2mRUcce)"Sears has repeatedly engaged in wishful thinking in earnings release after earnings release over the last several years that they could turn the business around," said Ken Perkins, president of industry research firm Retail Metrics."In today's highly competitive retail environment, which requires sizeable investments to compete with Amazon and off-price chains they no longer have the resources to do so."Sears, which lost $2.22 billion in the year ended Jan. 28, has $286 million in cash on hand. Retailers in distress often use their accounts receivable. Sears has $466 million in receivables, down substantially from 2012, when the company had $635 million in receivables and $609 million in cash.

Since 2012, Sears accumulated $10.54 billion in losses while revenue fell 47 percent to $22.1 billion. During that time, Sears cut the number of its U.S. stores by nearly a third, reduced holdings in Sears Canada, and spun off the Lands' End clothing chain. BLOW TO LAMPERT In recent years, Sears has placed some of its stores into a real estate investment trust (REIT), sold its Craftsman line of tools, and repeatedly raised debt from billionaire Chief Executive Edward Lampert's hedge fund. Lampert owned nearly 10 percent of the REIT that paid Sears $2.6 billion in 2015 for the stores it purchased, many of which were then leased back to the retailer.

Indian regulator says Dow, duPont deal likely to hurt competition NEW DELHI India's competition regulator said the proposed merger between Dow Chemical and duPont was likely to hurt competition, a government statement said on Wednesday.

Shareholders urge Akzo to negotiate with suitor PPG AMSTERDAM Shareholders piled pressure on Dutch paint maker Akzo Nobel to open talks with U.S. rival PPG Industries on Wednesday after Akzo rejected a revised 22.7 billion euro takeover offer as too low, too risky and a bad fit culturally.

Canada's Enbridge to cut 1,000 positions after buying Spectra CALGARY, Alberta Canada's Enbridge Inc said on Wednesday it would cut about 1,000 positions, or 6 percent of its work force, after buying Spectra Energy Corp of Houston, the first layoffs since the deal.