HSA investment transfer

[doneby35]

I think me overthinking this is clouding my judgement so perhaps someone smarter than can help me come to the right conclusion.

I currently have an HSA with my employer, which I max out and invest the funds. Employer is now moving to a new HSA provider and they're offering people the option to either leave the HSA funds as they are with the old HSA provider, or move the HSA funds to the new HSA provider. By choosing the second option, they'll be covering the $25 fee of closing the old HSA provider account, and not put people in a position where they are paying monthly fees in the old HSA.

Moving the funds to the new HSA provider means selling the investments and re-investing in the new HSA, but since the markets are down, and with it my HSA investments, does that mean selling is a bad idea since I would be selling at a loss? or is it simply that even though I'll be selling at a loss, I would be re-buying an equivalent amount of shares in the new HSA without really losing anything?

[uniwelder]

I'm not an expert, but as no one has replied back to you yet, I thought I'd comment.  Selling the current investments and reinvesting in the new HSA should be a wash.  You'll be selling low and buying low, but I don't know how long it all takes.  I might guess there could be a 30 day lag, so the markets could shift somewhat during the time your funds are in limbo.

The other question is whether you should switch from the old HSA to the new one.  It sounds like there are monthly fees with the old account.  How about the new account and how do they compare?  I switched from HSA Bank to Fidelity a few years ago.  Fidelity has no fees at all, plus my other investments are there, so it streamlines things nicely.

[cincystache]

Yea, I agree with @uniwelder, it is pretty much a wash, just roll over the funds to the new provider if you want to keep things simple.

If you're willing to do a little more work...
You could also likely transfer those funds to fidelity. As mentioned, fidelity is awesome for HSA in that you can invest in any funds you want AND they don't charge any fees. I contribute to my employer's HSA (to get the best tax break including FICA and medicare tax free) and then transfer from my employer's provider into fidelity once a year (costs $10 per transfer). You don't have to wait until you leave your employer to roll that money into fidelity (unlike a 401k rollover).

I know this sounds like even more work but Fidelity does most of the transfer work for you and I prefer to have the bulk of my HSA money within fidelity which is where I want it to be long term.

[doneby35]

Thanks for your thoughts @uniwelder and @cincystache and yes I'm thinking selling wouldn't be a problem because I'd be buying as soon as the funds get transferred. Looks like the wash sale rule does not apply to HSA because it's tax-advantaged.

I do have a Fidelity HSA as well, but since the employer is saying that there's a $25 fee to close the old HSA provider's account (which they will take care of if I choose the option to move the funds to the new employer chosen HSA provider), I might just take that route instead to save $25 if the new HSA provider has good low cost index funds.

[MDM]

Do check all the fees associated with the new HSA provider.  Saving $25 once won't be a good deal if fees higher than Fidelity's eat at your balance year after year....

[doneby35]

Do check all the fees associated with the new HSA provider.  Saving $25 once won't be a good deal if fees higher than Fidelity's eat at your balance year after year....

Yep that is a good point, thanks for the reminder. I'll definitely be going over all fees and expenses before choosing where to transfer.