An HSA refers to a health savings account. It’s a tax-exempt health spending account which requires an HSA bank (the custodian or trustee). There are multiple such companies and each has their own unique fee structures.
The process of opening an HSA is quite simple. To qualify you need a HDHP (high deductible health plan) and you shouldn’t be covered by any other kind of health plan, such as work, medicare, or Tricare.
I have an HDHP with Kaiser Permanente and I pay $230/month for this. I am eligible for an HSA and can contribute up to $3,400/year tax-free to it. If you do the math, I am actually getting an $85/month “savings” by having an HSA which means my insurance is only costing me $145/month.
Benefits of an HSA
- claim a tax deduction for your contribution to the HSA
- the money isn’t lost unlike an FSA and you can take it with you
- if invested, the earnings aren’t taxed
- contributions of $3,400 for single, $6,900 for family
Opening An HSA
Thankfully the process is quite straightforward. The toughest part will be choosing the right bank for you to hold your HSA.
At the end of this post I will take you through the brief process of opening an HSA.
Once you open the account, you can transfer your HSA held at other accounts into it. Contributing to your HSA is easy, it’s the same as transferring money between 2 bank accounts.
Factors To Consider When Choosing An HSA Bank
An HSA is just like any other bank account and is held at a bank (the custodian, or trustee). The bank is in charge of making sure they and you are in compliance with IRS requirements.
HSA’s are becoming more popular but for now they aren’t popular enough for fee transparency to take hold. You’ll see below how chaotic it can be.
Almost every bank has an account maintenance fee and investment fee. But some will hit you with other little fees which might add up if you are planning on making a lot of withdrawals or transfers.
Most HSA custodians will have a section on their website where fees are listed. Here is an example from Optum bank.
Each bank will either offer their own trading platform and their unique investment options or they will use a 3rd party brokerage such as TD Ameritrade or Vanguard.
There will often be a link named “investment options” or “explore investments” where you can see what specific investments are offered.
For the most part, it will be mutual funds, stocks, bonds, money market and CD’s. And of course, securities investments wouldn’t be FDIC insured.
Keeping Things Simple
If you already do business with a bank then it might make sense to hold your HSA with that same bank. There is a lot of value in keeping things simple.
I also prefer to invest in the same investments. Having too many to keep track of makes my small brain overheat.
HSA Research Sites
I only found one website that I think I can recommend for those of you who want to research your own HSA bank.
HSA Research has an impressive list. Everything I researched has been accurate on their website and they don’t seem to favor any one particular company.
I ended up with Optum Bank and you can read their review here.
Examples Of HSA Custodians
Since I am in search of a good HSA bank, I decided to do a little research and list it here for you guys. It’s quite obvious to see which companies are the best at marketing.
HSA Bank is the best at marketing and their shit pops up everywhere I look. Let’s see how good they are.
Strike 1. Right off the bat I was able to eliminate HSA Bank because they seem to be a middle-person and don’t take ownership of investments. They link you to either TD Ameritrade or DEVENIR.
If any issues would arise, one company would send me to the next and I’d be caught in the middle. Of course, I could be totally wrong. However, let’s see what other options there are.
Strike 2. I wasn’t able to find a link with HSA Bank’s fees schedule but there was a link for “HSA Bank in the news”.
Strike 3. I clicked on each brokerage link and it appeared that each had their own fee structure as well. It would make sense that HSA Bank would have their own fees/penalties and the brokerage a separate set of fees/penalties.
Optum Bank seems much easier of a website to navigate. The customer service section answered most questions that I could come up with as you can see in the screenshot below.
Strike 1. The account maintenance fee isn’t listed. But they claim to have only 3 fees:
- account maintenance fee (it’s $2.75/month I later found out)
- ATM fee
- account closing fee (ridiculous)
Strike 2. They didn’t list their “investment fee” in their fee schedule. But it’s 0.03% of your balance every month. Maximum of $10/month.
The investment options are incredibly easy with Optum and most seem to be Vanguard options. Click here for the pdf of investment options by Optum Bank.
Health Savings Administrators
The reviews I read for their website is pretty bad and it seems that people have the same opinion about their customer service.
Let’s get into the fees, this is gonna be fun. These are all the fees that they list for their HSA product:
- administration fee $45/year
- custodial fee “6.25 basis points per quarter” (why the fuck would you list it in this manner for the average consumer?)
- Paper check $10
- Excess contribution $25
- Non-sufficient funds (NSF) $30
- Transaction correction $25
- Wire transfer $25
- Duplicate copy of tax document $4
- Transfer/rollover to another custodian $25
- Account closure $25 (note, this is essentially double tapping you for the same as above)
- Replace lost or stolen debit card $12
- Additional charge (per card) for three or more debit cards $6
- Stop payment $25
- Copy of debit card merchant receipt $25
- Terminate debit card access $25
Granted, most other companies probably have these fees as well even if they don’t list it. But I thought this list is impressive and deserved to be typed out for your viewing pleasures.
As for investment options, it’s quite extensive actually. I am not an investor so I don’t need this many options:
- Franklin Templeton
- T. Rowe Price
- OBS Financial
- Blue Prairie
- Healthy Hives
Bank of America HSA
I thought I would review one of the big-bank HSA’s. It appears that BofA is the only one that allows individual consumers to open an HSA. Wells Fargo, for example, only allows it through a workplace.
There is no listing of fees, investment options, or any other useful information. Most likely HSA’s are offered by BofA for the sake of convenience for their customers but it clearly isn’t their forte.
My Final Choice – Optum Bank
I decided to go with Optum Bank because they are more transparent than the other options out there.
They didn’t disclose the account fee or investment fee on their website but I found out about these once I went to sign up.
The account fee is waived for balances >$3,000 so I won’t have a balance fee. And the investment fee will be at $10/month which is taken from my investments.
The process was really easy. I entered my personal information and they told me that an email will arrive in 3-5 days to tell me how to fund the account. I’m glad everything can be done digitally.
Step1: enter name, SSN, DOB, address
Step2: enter when I enrolled in my HDHP
Step3: sign disclosures