Author Topic: HSAs - when bank managers don't get it...  (Read 5211 times)

nereo

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HSAs - when bank managers don't get it...
« on: April 04, 2018, 11:56:40 AM »
I know us mustachians are far from the norm when it comes to our approach to money and savings - every so often I get a reminder of this when people can't even process my choices.  But it's a bit disconcerning when a bank manger - someone who's supposed to be very good with money - doesn't get it.

Recently started a new job with a HDHP and an HSA. When filling out the paperwork I mentioned I was contributing the maximum I could each pay period in order to hit the family max by the end of the year. Manager looked impressed/stunned, and then said "well you'll want to use that money right away anytime you have a medical expense."  I should have just ignored that comment but instead I told the manager that, no, our plan was to contribute the max each year and save all medical receipts but NOT draw down the HSA every chance we had, since its the only way we could avoid payroll taxes + pre-tax condtibutions + tax-free growth.

what followed was a very confused conversation where the manager acknowledged that we could reimburse (withdraw) funds at any time for paid medical expenses, and understanding that HSAs pay now taxes whatsoever, but the manager just couldn't get over the hurdle about why we'd want to keep several thousand$ in the account if we could otherwise take it out. 
Part of me wanted to send over the link to the madFI's HSA page, but nah... we exist outside the norm and I don't think it would make much difference here.

ScreamingHeadGuy

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Re: HSAs - when bank managers don't get it...
« Reply #1 on: April 04, 2018, 01:01:50 PM »
I contribute to a HSA through payroll deductions. 

When we learned of the revision to the maximum contribution for 2018 I decided to call my benefits management company to help me change my contributions mid-year to avoid excess contributions. 

The person at the benefits management company had no idea about the maximum contribution or the change thereto.  I wound up on hold so much that call (but did eventually get the payroll deductions fixed so I will be contributing to the "new" maximum). 

CoffeeAndDonuts

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Re: HSAs - when bank managers don't get it...
« Reply #2 on: April 04, 2018, 02:04:58 PM »
I've had so many conversations that go this way.

And I've also been pretty surprised over the years at the number of people that I'd expect to be financially literate b/c of their jobs, education, whatnot that are not.

Underlying the strategy you're using for the HSA (and which I am too) is the fact that we have the excess cash and savings rate to do so. Very few people I know can get to the point of maxing out a 401k. Heck, my company has an average employee age of ~50 and avg salary that's a bit shy of twice the national household median income. Only between 10 and 20% of our staff contributes at the level of our SIMPLE-IRA limit (which is just $12,500/year, $13,500 with catch-up). And most have working spouses doing well. I don't get it.

But anyway, if they aren't even doing the basics, more advanced stuff like backdoor roths, hsa hacks, DAF strategies, tax loss harvesting, ACA hacks, etc aren't going anywhere since execution is also predicated on some combination of not having healthcare expenses or having enough excess cash that you can defer withdrawals.

If you spend nearly all your earnings, this stuff is really easy to ignore because it's so irrelevant.

I've always been a saver and paid attention to this. I was doing some documentation clean up and was reminded that I did a tIRA to Roth conversion in 1998 (the first year or two of the roth) in my very early 20's. 20 years of thinking about this kind of stuff made reading the Mad Fientist post relatively easy. Without a lot of context, it's not easy to grasp!




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Re: HSAs - when bank managers don't get it...
« Reply #3 on: April 04, 2018, 02:13:10 PM »
I know us mustachians are far from the norm when it comes to our approach to money and savings - every so often I get a reminder of this when people can't even process my choices.  But it's a bit disconcerning when a bank manger - someone who's supposed to be very good with money - doesn't get it.

Recently started a new job with a HDHP and an HSA. When filling out the paperwork I mentioned I was contributing the maximum I could each pay period in order to hit the family max by the end of the year. Manager looked impressed/stunned, and then said "well you'll want to use that money right away anytime you have a medical expense."  I should have just ignored that comment but instead I told the manager that, no, our plan was to contribute the max each year and save all medical receipts but NOT draw down the HSA every chance we had, since its the only way we could avoid payroll taxes + pre-tax condtibutions + tax-free growth.

what followed was a very confused conversation where the manager acknowledged that we could reimburse (withdraw) funds at any time for paid medical expenses, and understanding that HSAs pay now taxes whatsoever, but the manager just couldn't get over the hurdle about why we'd want to keep several thousand$ in the account if we could otherwise take it out. 
Part of me wanted to send over the link to the madFI's HSA page, but nah... we exist outside the norm and I don't think it would make much difference here.

What investment options does your brick and mortar bank offer for HSAs?  My experience so far is that non-internet banks have crap for investment options.

solon

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Re: HSAs - when bank managers don't get it...
« Reply #4 on: April 04, 2018, 02:13:28 PM »
I just started a new job and just became eligible to contribute to an HSA. I was talking to the HR manager about HSA strategy. She admitted maxing it out quickly and investing it each year was an excellent strategy. That's what she is doing herself. I am the only other person she has ever heard of that is doing that. Our company has about 150 people.

Davnasty

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Re: HSAs - when bank managers don't get it...
« Reply #5 on: April 04, 2018, 02:24:47 PM »
I've always been a saver and paid attention to this. I was doing some documentation clean up and was reminded that I did a tIRA to Roth conversion in 1998 (the first year or two of the roth) in my very early 20's. 20 years of thinking about this kind of stuff made reading the Mad Fientist post relatively easy. Without a lot of context, it's not easy to grasp!
True story. I remember trying to understand the Roth IRA conversion ladder concept. I had most of if down after reading about it on some forums but I couldn't find where anyone discussed the mechanics of converting just enough that you pay no/little taxes on it. Everyone just said "And then you don't have to pay taxes."... But why!

Now that I understand it the concept is simple. You'd have to be some kind of moron not to see how easy it is :)

CoffeeAndDonuts

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Re: HSAs - when bank managers don't get it...
« Reply #6 on: April 04, 2018, 02:30:42 PM »
What investment options does your brick and mortar bank offer for HSAs?  My experience so far is that non-internet banks have crap for investment options.

Awesome point. I feel like I've seen banks stepping away from even offering it. Hard to believe they ever get enough accounts with enough balances for a non-specialty bank to justify the costs with these sorts of specialty accounts. Even the big name banks have pretty poor offerings.

It really seems the specialty providers are where it's at.

At our company, we recommend one provider but make it clear that the person can go wherever they want and just to give us a routing and account # to plug into our payroll software. Works fine.

If you're stuck with one you don't like, I believe you can withdraw once a year via a check and re-deposit into another provider that you prefer. https://thefinancebuff.com/how-to-rollover-an-hsa-on-your-own-and-avoid-trustee-transfer-fee.html may be helpful though it's a bit dated. I used the technique in 2015 to avoid transfer fees.

Davnasty

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Re: HSAs - when bank managers don't get it...
« Reply #7 on: April 04, 2018, 02:45:46 PM »
Regarding OP, I would give them a break on their first response. Most everyone they work with is using the HSA for its intended purpose so that's what they understand. The fact that they still couldn't wrap their head around the concept after you explained it is a bit strange though. I wonder if it was just the short term stubborness of the human brain. I can think of at least a few times where I explained something foreign to someone and they couldn't think outside of the box enough to get it no matter how I tried to word it. Then at a later date the topic was discussed and they understood just fine.

joonifloofeefloo

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Re: HSAs - when bank managers don't get it...
« Reply #8 on: April 04, 2018, 02:52:24 PM »
I've had so many conversations that go this way.

And I've also been pretty surprised over the years at the number of people that I'd expect to be financially literate b/c of their jobs, education, whatnot that are not.

YES. Oh boy oh boy.

wageslave23

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Re: HSAs - when bank managers don't get it...
« Reply #9 on: April 04, 2018, 03:24:11 PM »
I work at a CPA firm and presented HSA's as investments for a staff meeting.  I think only one or two other people are even considering it.  Everyone else's eyes just glazed over (I'm now known as the "HSA expert"- LOL).  Also, I'm not too impressed with the financial acumen of people that I've worked with at banks.  Trying to explain to them ROI, leveraging, debt to income ratios, etc seems more difficult than it should be.
« Last Edit: April 04, 2018, 03:29:18 PM by Ryancanderson23 »

nereo

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Re: HSAs - when bank managers don't get it...
« Reply #10 on: April 04, 2018, 04:42:14 PM »
What investment options does your brick and mortar bank offer for HSAs?  My experience so far is that non-internet banks have crap for investment options.

Awesome point. I feel like I've seen banks stepping away from even offering it. Hard to believe they ever get enough accounts with enough balances for a non-specialty bank to justify the costs with these sorts of specialty accounts. Even the big name banks have pretty poor offerings.

It really seems the specialty providers are where it's at.
...

If you're stuck with one you don't like, I believe you can withdraw once a year via a check and re-deposit into another provider that you prefer.

Yeah, that's the second thing I learned today - that the HSA options here are crap.  Oh well... since my balance is currently $0 I'll contribute for several months before switching over to a better online option. 

Anyone have experience with HealthSavings Administrators?  They are the ones mentioned by name at Vanguard...

HPstache

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Re: HSAs - when bank managers don't get it...
« Reply #11 on: April 04, 2018, 04:56:49 PM »
What investment options does your brick and mortar bank offer for HSAs?  My experience so far is that non-internet banks have crap for investment options.

Awesome point. I feel like I've seen banks stepping away from even offering it. Hard to believe they ever get enough accounts with enough balances for a non-specialty bank to justify the costs with these sorts of specialty accounts. Even the big name banks have pretty poor offerings.

It really seems the specialty providers are where it's at.
...

If you're stuck with one you don't like, I believe you can withdraw once a year via a check and re-deposit into another provider that you prefer.

Yeah, that's the second thing I learned today - that the HSA options here are crap.  Oh well... since my balance is currently $0 I'll contribute for several months before switching over to a better online option. 

Anyone have experience with HealthSavings Administrators?  They are the ones mentioned by name at Vanguard...

My point is that maybe that's why brick and mortar banks don't see people using HSA's as a viable investment option, it doesn't surprise me that the banker your were working with has only seen people using the account as intended.  Are the tax advantages really that lucrative if you're putting your money into an investment paying a fraction of a percent?

tralfamadorian

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Re: HSAs - when bank managers don't get it...
« Reply #12 on: April 04, 2018, 05:19:28 PM »
Yeah, that's the second thing I learned today - that the HSA options here are crap.  Oh well... since my balance is currently $0 I'll contribute for several months before switching over to a better online option. 

Anyone have experience with HealthSavings Administrators?  They are the ones mentioned by name at Vanguard...

No experience with HealthSavings Administrators but the two I see the most around here are HSA Bank and Lively. Both are $2.50/mo and use TDAmeritrade self-directed for investments. For HSA Bank the $2.50 is waived if you keep $5,000 in your account (not transferred to TDAmeritrade). Lively's $2.50 fee is for using the TDAmeritrade portal.

I personally use HSA Bank. The interface is clunky; I've had to call them a couple time with questions but they answered quickly and were friendly/helpful.

From google-fu, HealthSavings Administrators charges $45/yr plus a 0.25% fee. So, $15/yr + 0.25% more than HSA Bank or Lively.

CoffeeAndDonuts

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Re: HSAs - when bank managers don't get it...
« Reply #13 on: April 04, 2018, 06:17:29 PM »
No one around these parts ever mentions Further (formerly SelctAccount) but they should be in the mix.

Free basic h.s.a.

Adding investing is just $1/mo. $1k minimum for the deposit account which earns nearly nothing. Compared to hsa bank, I'd rather have $4k more invested for $12/yr net extra cost.

Below $10k investable you have about 25-30 mutual funds including a few vanguard funds. Not awesome but not bad if you're careful.

Over $10k and you can switch to self directed brokerage at Schwab. Free trading on a lot of funds. Vanguard funds arent free but the Schwab comparables are and are very competitive (e.g. SCHB has a .03% exp ratio and no buy/sell fee).

And the web site just got modernized, customer svc has been great, and most of my time is on schwab.com anyway.
« Last Edit: April 05, 2018, 05:35:51 AM by CoffeeAndDonuts »

CptCool

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Re: HSAs - when bank managers don't get it...
« Reply #14 on: April 05, 2018, 09:16:12 AM »
Keep in mind you avoid some extra taxes if you contribute directly from your paycheck (no FICA is paid, saving 7.65%). Make sure to weigh whether it is worth it to contribute to an HSA on your own with lower fees and better investments, or to just use whatever bank your company works with for HSAs already.

I personally do the latter, even though they don't offer the best rates & terms because I'm still coming out ahead with the reduced taxes paid.

alanB

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Re: HSAs - when bank managers don't get it...
« Reply #15 on: April 05, 2018, 09:18:55 AM »
Yeah, that's the second thing I learned today - that the HSA options here are crap.  Oh well... since my balance is currently $0 I'll contribute for several months before switching over to a better online option. 

Anyone have experience with HealthSavings Administrators?  They are the ones mentioned by name at Vanguard...

No experience with HealthSavings Administrators but the two I see the most around here are HSA Bank and Lively. Both are $2.50/mo and use TDAmeritrade self-directed for investments. For HSA Bank the $2.50 is waived if you keep $5,000 in your account (not transferred to TDAmeritrade). Lively's $2.50 fee is for using the TDAmeritrade portal.

I personally use HSA Bank. The interface is clunky; I've had to call them a couple time with questions but they answered quickly and were friendly/helpful.

From google-fu, HealthSavings Administrators charges $45/yr plus a 0.25% fee. So, $15/yr + 0.25% more than HSA Bank or Lively.

I believe that HealthSavings Administrators has Vanguard Admiral funds with no minimum.  The 0.25% custodial fee sounds like too much though.

Seems like most ok HSA plans have at least one low-cost S&P index fund.  I just pick that, it is still easy to diversify overall since the balance is small compared to our other accounts.

No matter what you should contribute as a payroll deduction if you can since that portion is not subject to FICA tax.  The so-so plans my wife and I have through work have the $3/mo fee waived as long as we stay employed.  Definitely check on that too.
« Last Edit: April 05, 2018, 09:20:33 AM by alanB »

CoffeeAndDonuts

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Re: HSAs - when bank managers don't get it...
« Reply #16 on: April 05, 2018, 10:29:00 AM »
Keep in mind you avoid some extra taxes if you contribute directly from your paycheck (no FICA is paid, saving 7.65%). Make sure to weigh whether it is worth it to contribute to an HSA on your own with lower fees and better investments, or to just use whatever bank your company works with for HSAs already.

I personally do the latter, even though they don't offer the best rates & terms because I'm still coming out ahead with the reduced taxes paid.

Just in case it was missed above, you can have it both ways. Contribute via paycheck deduction to avoid FICA and then transfer annually to a HSA provider of your choice. Whether it's worth the effort is a question left to the reader.

https://thefinancebuff.com/how-to-rollover-an-hsa-on-your-own-and-avoid-trustee-transfer-fee.html


2lazy2retire

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Re: HSAs - when bank managers don't get it...
« Reply #17 on: April 05, 2018, 12:39:43 PM »
I've always been a saver and paid attention to this. I was doing some documentation clean up and was reminded that I did a tIRA to Roth conversion in 1998 (the first year or two of the roth) in my very early 20's. 20 years of thinking about this kind of stuff made reading the Mad Fientist post relatively easy. Without a lot of context, it's not easy to grasp!
True story. I remember trying to understand the Roth IRA conversion ladder concept. I had most of if down after reading about it on some forums but I couldn't find where anyone discussed the mechanics of converting just enough that you pay no/little taxes on it. Everyone just said "And then you don't have to pay taxes."... But why!

Now that I understand it the concept is simple. You'd have to be some kind of moron not to see how easy it is :)

Then someone mentions ACHA subsidies and roth conversions and your some kinda moron AGAIN :)

friedmmj

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Re: HSAs - when bank managers don't get it...
« Reply #18 on: April 07, 2018, 05:09:43 AM »
The FICA savings is not really a savings unless your full year income is below FICA maximum.  You end up hitting the same annual max withholding just a bit later in the calendar. 

maizefolk

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Re: HSAs - when bank managers don't get it...
« Reply #19 on: April 07, 2018, 05:58:04 AM »
The FICA savings is not really a savings unless your full year income is below FICA maximum.  You end up hitting the same annual max withholding just a bit later in the calendar.

Well you'd still be saving the medicare portion of FICA, wouldn't you?

Still it's a good point, if your income is high enough to max out SS withholding for the year, the difference in tax treatment between funding your HSA through payroll deductions and just writing a check each year is a lot smaller.

COEE

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Re: HSAs - when bank managers don't get it...
« Reply #20 on: April 07, 2018, 08:46:08 AM »
This is the first year for me test driving the HSA.  I see all of the benefits, but am struggling with whether or not to keep it next year. 

Why?  Because my medical costs have skyrocketed!  And I have the lowest deductible available in a HDHP. ~4k/year.
 So far this year I've spent $700 on healthcare expenses that would have otherwise been ~$200 in copays.  And we've just barely started the second quarter.  Sure, I'm still in free money from the company - but holy shit batman!  We're not even through the first quarter!

The only real advantage of the HDHP for me is that I have out-of-network coverage if I ever want / need it.

IDK - I guess I just need to sit down and do the math on if this is really benefiting us financially or not.  It's not an easy calculation though since there's so many variables that effect the outcome.

Here's hoping the next 3 quarters are more healthy!

nereo

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Re: HSAs - when bank managers don't get it...
« Reply #21 on: April 07, 2018, 08:59:58 AM »
This is the first year for me test driving the HSA.  I see all of the benefits, but am struggling with whether or not to keep it next year. 

Why?  Because my medical costs have skyrocketed!  And I have the lowest deductible available in a HDHP. ~4k/year.
 So far this year I've spent $700 on healthcare expenses that would have otherwise been ~$200 in copays.  And we've just barely started the second quarter.  Sure, I'm still in free money from the company - but holy shit batman!  We're not even through the first quarter!

The only real advantage of the HDHP for me is that I have out-of-network coverage if I ever want / need it.

IDK - I guess I just need to sit down and do the math on if this is really benefiting us financially or not.  It's not an easy calculation though since there's so many variables that effect the outcome.

Here's hoping the next 3 quarters are more healthy!

Hope you stay healthy.
Yeah, going from a system where there's no out-of-pocket costs or premiums to a HDHP plan has been a shock, even if I knew intellectually it was coming. For us it's a no brainer; the cost of insuring my family through the individual marketplace is >$1k/mo. Premiums + co-pays through work will likely be 1/3rd of this, and even less if we stay healthy (fingers crossed).

The tax savings seem meager right now given the low amounts and the short time frame, but I realize how it can add up to hundreds-of-k$ if we stick at it.  Of course maybe in 5 or 10 years the whole US healthcare system will migrate to single-payer as has much of the rest of the developed world.  I kinda see that as inevitable, though slow.

alanB

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Re: HSAs - when bank managers don't get it...
« Reply #22 on: April 08, 2018, 11:12:26 AM »
This is the first year for me test driving the HSA.  I see all of the benefits, but am struggling with whether or not to keep it next year. 

Why?  Because my medical costs have skyrocketed!  And I have the lowest deductible available in a HDHP. ~4k/year.
 So far this year I've spent $700 on healthcare expenses that would have otherwise been ~$200 in copays.  And we've just barely started the second quarter.  Sure, I'm still in free money from the company - but holy shit batman!  We're not even through the first quarter!

The only real advantage of the HDHP for me is that I have out-of-network coverage if I ever want / need it.

IDK - I guess I just need to sit down and do the math on if this is really benefiting us financially or not.  It's not an easy calculation though since there's so many variables that effect the outcome.

Here's hoping the next 3 quarters are more healthy!

Our family HDHP deductible is $2700 and out-of-pocket max is $4500, so yea some plans are better than others.  If you do not get a match and have high medical expenses and your deductible is too high it may not be worth it.  I think there are fancy spreadsheets somewhere to compare plans and breakeven points based on spending, I don't have a link handy though...