Author Topic: moving current-employer HSA dollars to Fidelity  (Read 1278 times)

edmundblackadder

  • 5 O'Clock Shadow
  • *
  • Posts: 50
  • Location: NY, NY
moving current-employer HSA dollars to Fidelity
« on: August 23, 2022, 12:16:23 PM »
I just started a new job and opened an HSA account with the vendor they've contracted with. The options are terrible (you have to keep over 2K in cash at all times and the funds you can invest in have pretty high fees). I have a Fidelity HSA I've rolled previous employer HSAs into; is it possible to periodically roll my current employer's HSA into the Fidelity account, and if so, how often?

My new employer does contribute to the HSA so I don't want to just cut them out of the whole thing (and I'm not sure how I would contribute pre-tax dollars, anyway).

charis

  • Magnum Stache
  • ******
  • Posts: 3162
Re: moving current-employer HSA dollars to Fidelity
« Reply #1 on: August 23, 2022, 12:48:38 PM »
I believe you can make a direct HSA-to-HSA transfers as often as you want.  I have done this with my current employer HSA to my Fidelity HSA.  However, the first time, I made the mistake of transferring everything so my employer HSA was empty and they closed the account.  I had to call to get it reopened.  No idea why.

Psychstache

  • Handlebar Stache
  • *****
  • Posts: 1594
Re: moving current-employer HSA dollars to Fidelity
« Reply #2 on: August 23, 2022, 12:51:28 PM »
I just ignore my employers plan and contribute post tax dollars to my Fidelity HSA. The tax software will give you a warning like "Are you sure you are making your HSA deductions with after tax money??" and then you say yes and move on.

EvenSteven

  • Pencil Stache
  • ****
  • Posts: 990
  • Location: St. Louis
Re: moving current-employer HSA dollars to Fidelity
« Reply #3 on: August 23, 2022, 02:26:19 PM »
There is no limit to what is called "trustee to trustee transfers." This is where you ask the trustee where you want the money to request it from your previous trustee, and they send the check directly between trustees. Some HSA administrators charge a fee, so find out before hand if that is the case and how much.

You can also do what is a called an "indirect rollover." You can do this once every 365 days (not once per calendar year). This is where you withdraw from the old account, and send in the check to the new account.

turketron

  • Pencil Stache
  • ****
  • Posts: 774
  • Age: 38
  • Location: WI
Re: moving current-employer HSA dollars to Fidelity
« Reply #4 on: August 23, 2022, 02:53:25 PM »
That $2k cash restriction sounds like HealthEquity, which is who my employer uses. I set up a separate HSA at Fidelity and quarterly I initiate a transfer from Fidelity- I found that doing it from the Fidelity side was FAR easier than working with HealthEquity to initiate the transfer. Unfortunately I don't think there's a way to set up recurring transfers so I just have a recurring calendar reminder to do it quarterly.

It takes a couple weeks to process (I suspect they actually mail a paper form to HealthEquity, who then mails a check back to them, sadly). On the Fidelity side, from the Transfers menu you want to choose the option to "transfer an account to Fidelity" and then later in the process when it asks you what you want to transfer I choose cash only and I transfer all but ~$50 in the account. If it asks you if you want to do a "partial transfer" say yes, otherwise they may consider it a request to close the original and move everything to Fidelity.

Lastly, and something I have forgotten more than once - after the transaction has settled and the funds are in Fidelity, they're only in the cash/settlement fund, so you want to be sure to go back in and actually buy your index funds with it!

edmundblackadder

  • 5 O'Clock Shadow
  • *
  • Posts: 50
  • Location: NY, NY
Re: moving current-employer HSA dollars to Fidelity
« Reply #5 on: August 24, 2022, 10:01:16 AM »
Wow, there are two vendors with this awful cash requirement? Ugh.

Thanks, all -- I've only moved HSA money around after leaving jobs, so I wasn't sure if in-service transfers were doable, and it's very comforting to know they are! Off to set up calendar reminders to transfer.

frugalnacho

  • Walrus Stache
  • *******
  • Posts: 5055
  • Age: 41
  • Location: Metro Detroit
Re: moving current-employer HSA dollars to Fidelity
« Reply #6 on: August 24, 2022, 10:42:47 AM »
I just ignore my employers plan and contribute post tax dollars to my Fidelity HSA. The tax software will give you a warning like "Are you sure you are making your HSA deductions with after tax money??" and then you say yes and move on.

This is a mistake.  When you contribute directly through payroll into your employers plan the contribution doesn't count as income, and also doesn't count as income for purposes of calculating FICA taxes.  When you contribute directly to your own plan you still get to deduct it so it doesn't count as taxable income, but you do end up paying FICA taxes.  So going directly through your employer into their plan will save you 7.65% of your contribution. If you contribute the family max of $7,300 you end up saving $558.45 in FICA taxes by going through your employer.  You may also be leaving some kind of matching or free contributions on the table by not using your employer provided account.

HSA money is also your money so you can immediately move it to your own provider at any time.  The only caveat is that most employer providers will ding you with some kind of transfer fee to transfer the money out, so you probably want to let it accumulate and only transfer once or twice a year to minimize that transfer fee.  You'd have to do the math to figure out how often it makes sense to move to your own (better) provider once you account for the transfer fee.

Bottom line: It almost always makes sense to utilize your employer provided HSA, even if you intend to fully transfer everything to your own provider.

I also highly recommend using fidelity.  They have no fees, and you can even invest in index funds with no ER.  Dead nuts simple, and you can't find a cheaper a provider.

frugalnacho

  • Walrus Stache
  • *******
  • Posts: 5055
  • Age: 41
  • Location: Metro Detroit
Re: moving current-employer HSA dollars to Fidelity
« Reply #7 on: August 24, 2022, 10:49:03 AM »
I just started a new job and opened an HSA account with the vendor they've contracted with. The options are terrible (you have to keep over 2K in cash at all times and the funds you can invest in have pretty high fees). I have a Fidelity HSA I've rolled previous employer HSAs into; is it possible to periodically roll my current employer's HSA into the Fidelity account, and if so, how often?

My new employer does contribute to the HSA so I don't want to just cut them out of the whole thing (and I'm not sure how I would contribute pre-tax dollars, anyway).

You just deduct it when you file your taxes, similar to if you make a tIRA contribution.  So it still ends up being pre tax, you just have to wait until filing your taxes to square it all up.

But as I explained in my previous post, when you contribute directly through payroll into your company's plan the deduction comes off immediately, and it comes off before they calculate FICA taxes so you end up savings 7.65% in FICA taxes vs making your own contribution to your own provider.  IMO that benefit alone makes it worthwhile to always use your company's provider.  You can always transfer it out later, and if your company HSA is shit then I recommend you do.

turketron

  • Pencil Stache
  • ****
  • Posts: 774
  • Age: 38
  • Location: WI
Re: moving current-employer HSA dollars to Fidelity
« Reply #8 on: August 24, 2022, 11:13:12 AM »
Wow, there are two vendors with this awful cash requirement? Ugh.

Wow I'm surprised too, I figured HealthEquity was uniquely bad!

Psychstache

  • Handlebar Stache
  • *****
  • Posts: 1594
Re: moving current-employer HSA dollars to Fidelity
« Reply #9 on: August 24, 2022, 11:28:17 AM »
I just ignore my employers plan and contribute post tax dollars to my Fidelity HSA. The tax software will give you a warning like "Are you sure you are making your HSA deductions with after tax money??" and then you say yes and move on.

This is a mistake.  When you contribute directly through payroll into your employers plan the contribution doesn't count as income, and also doesn't count as income for purposes of calculating FICA taxes.  When you contribute directly to your own plan you still get to deduct it so it doesn't count as taxable income, but you do end up paying FICA taxes.  So going directly through your employer into their plan will save you 7.65% of your contribution. If you contribute the family max of $7,300 you end up saving $558.45 in FICA taxes by going through your employer.  You may also be leaving some kind of matching or free contributions on the table by not using your employer provided account.

HSA money is also your money so you can immediately move it to your own provider at any time.  The only caveat is that most employer providers will ding you with some kind of transfer fee to transfer the money out, so you probably want to let it accumulate and only transfer once or twice a year to minimize that transfer fee.  You'd have to do the math to figure out how often it makes sense to move to your own (better) provider once you account for the transfer fee.

Bottom line: It almost always makes sense to utilize your employer provided HSA, even if you intend to fully transfer everything to your own provider.

I also highly recommend using fidelity.  They have no fees, and you can even invest in index funds with no ER.  Dead nuts simple, and you can't find a cheaper a provider.

I appreciate you looking out, but in my specific circumstances it is fine. I don't pay FICA taxes and my employer doesn't have any kind of contribution or match plan with our HSA.

jinga nation

  • Magnum Stache
  • ******
  • Posts: 2696
  • Age: 247
  • Location: 'Murica's Dong
Re: moving current-employer HSA dollars to Fidelity
« Reply #10 on: August 24, 2022, 06:19:25 PM »
What OP asked is being discussed by bunch of my colleagues. We recently moved to another HSA provider as the previous exited the business. This is their fee structure: https://www.wealthcaresaver.com/docs/Investment_Experience_Fees.pdf

WealthCare Saver has low ER ETFs: https://www.wealthcaresaver.com/docs/WealthCare_Saver_HSA_Investment_Options.pdf

I'll be opening a Fidelity HSA (not the Fidelity Go HSA which is managed and has higher fees). A co-worker did the HSA rollover earlier this year.
https://www.fidelity.com/go/hsa/investing-hsa-your-way

I'd have preferred to do this with Vanguard as almost all of our accounts are with them, but they don't offer a HSA.
« Last Edit: August 24, 2022, 06:24:11 PM by jinga nation »

johnmyster

  • 5 O'Clock Shadow
  • *
  • Posts: 12
Re: moving current-employer HSA dollars to Fidelity
« Reply #11 on: August 30, 2022, 05:57:40 AM »
Optum managed HSAs also have the $2k cash requirement.  Everything >$2k can transfer into investment options.
« Last Edit: August 30, 2022, 06:39:44 AM by johnmyster »

 

Wow, a phone plan for fifteen bucks!