New HSA account - who to use?

[mousebandit]

We are getting ready to set up an HSA account.  We have the HDHP plan, and I've been looking at some past threads and went to the vanguard website.

It looks like vanguard is basically recommending health savings administrators.  I read another thread here and linked to bogleheads about saturna.  A lot of the discussion is still over my head since I'm so new to investing.  Admiral shares, etf, caps, etc. 

Here's what we're thinking.  Sock money away into the HSA.  Pay all qualified medical expenses with post-tax cash for the next 5 years or so.  At that point, we will be re-evaluating our FIRE date, and may choose to do a partial FIRE then.  So, potentially accessing reimbursement money in about 5 years.  We will probably invest $2000-$3000 in 2016, and then that much or more in following years.  It's possible we will start self-employment on the side next year, and handle health insurance through the business, and thus the HSA through there, as well.

What should I be looking for in an account that would help us maximize our goals, and why?  Any flat out recommendations on a bank or admin? 

Thank you! 
MouseBandit

[redcedar]

A few starter questions for you:

Is the HDHP offered through your employer? If so, do they offer payroll deduction for HSA contributions? Also, do they offer any employer match?

If yes on payroll deduction, strongly consider this even if the HSA admin is less than ideal. Its hard to beat the immediate benefit of no payroll taxes.

If yes on employer match or contribution, make sure to get this free money. One thing to watch for is that employer contributions to an HSA, unlike those to a 401k/403b, do count against your annual contribution max.

If neither of these apply, you are basically an HSA admin free agent - free to chose any admin that works well for you. There are many HSA admins out there but you should be able to quickly narrow down the field to less than a handful. I would strongly recommend focusing on three things - fees, investment options, and investment requirements.

Fees - while HSAs are becoming more competitive, hefty fees do still exist with many admins. These include monthly fees, statement fees, etc. Now many are "waived" if your employer offers a plan with a specific admin - waived meaning your employer pays them on your behalf. Look for sub $2/month fees and an option for free statements via electronic delivery.

Investment Options - good news here is that many admins have recently seen the light on low cost index funds via Vanguard, Schwab, Fidelity, etc. If an admin has none of these, strike them from your evaluation list. Now you don't need that many low cost index funds so don't be alarmed if an admin has say 4-5 index funds and many costly other funds. A few admins give you access to low cost investing via commissionless ETFs which are essentially low cost index funds that have been made to trade real time like a stock (read up on this if you are truly interested in learning. It is not as scary as it may sound).

Investment Requirements - many HSA admins have hurdles to cross before you can invest. These hurdles are often dollar amount based like "you can invest any amount after you reach $3,000 in your HSA savings account". So your first $3k earns near zero rates and then you get to invest the rest. For someone who wants to invest all of their money, this is a frustrating hurdle. Look for admins that allow first dollar investing or at the very least a very low hurdle before you can invest. Good news here is that first dollar investing is becoming more of the norm but not all admins have yet to admit the market is demanding this.

So who should you consider? Here is a short list of HSA admins that are some of the biggest yet also innovative. It is not an exhaustive list and definitely doesn't include any smaller providers like the growing number of credit unions getting into the HSA world.
The HSA admin your employer has partnered with
HealthSavings - you mention this admin already
HealthEquity
HSA Bank
WageWorks
Optum

Good luck with your HSA setup and let us know how it goes.

[kendallf]

I currently have an account with HealthEquity (mandated for my plan's premium pass through, payroll contributions) and an account at HSA Bank (my own).  I transfer money over to HSA bank, where I have an investment account, once a year.  HSA Bank allows investment with Ameritrade and has some good low fee ETF options.

A couple of things to note: as GrOW notes above, HSA Bank requires a minimum of $5k uninvested to avoid monthly fees.  Second thing: transfers between accounts are a pain in the ass and take FOREVER, in my experience.  Mail or fax in a paper form, wait two months (!) and finally your money appears out of Neverland.  Plan on doing that maybe once a year.  I hope the providers make this electronic and quick, but mine haven't so far.

[mousebandit]

THANK YOU!!  This is awesome information! 

So, no, the employer doesn't offer any HSA, so we are on our own here - free agents.  It would be nice to get the FICA deduction, but it's a moot issue. 

I will research the list your provided and also check with our credit union, to see if they're offering anything.  And yep - you nailed it for my reaction to ETFs' - I technically *know* what they are, but as soon as I see those letters, I panic a little, and read faster, trying to avoid making eye contact with the word, because I really don't understand why it matters, haha!  I will buckle down and make myself study a little so I have it straight in my head! 

THANKS!
MouseBAndit

[ShoulderThingThatGoesUp]

I have a company-sponsored HSA through HSA Bank, and the investment portion is through TD Ameritrade. I can buy VTI there with zero commission, so it works well enough for my purposes. I have it set to keep $2000 in cash and sweep anything above that to the investment account.

[Highbeam]

I use plain old bank of America for my HSA. After 1000$ I can invest the rest and they offer vanguard. So far it's doing very well. I already have accounts with BOA so while the HSA is a different branch, it's all too familiar.

[mousebandit]

Hi Again!  I'm trying to compare a few different administrators, and am wondering if the Expense Ratio is set by the fund (therefore would be the same from admin to admin for the same fund) or if that's including behind-the-scenes fees to the admin?  TY!

[mousebandit]

@shoulder-thing - I am looking at HSA Bank (for a consumer-HSA account) and I can see that they have monthly maintenance fees and monthly investing fees ($2.50 and $3.00, respectively) that are waived when you keep "bank" account balance over $5000. 

-Does that bank account balance include "both" the available (non-invested) funds and invested funds, or just the available (non-invested) funds? 

Is TD Ameritrade charging fees on top of this?  I'm trying to understand their Fee Schedule, and I see fees for trades and fees for No-Load Mutual Funds.  I would be wanting to put everything into something like a Vanguard Index fund.  I haven't yet figured out how to view what funds they offer. 

THANK YOU!!!  I'm trying to get my head wrapped around all the new information, LOL!

MouseBAndit

[billatq]

I have a HDHP through my employer with HSA Bank, and I set up the TD Ameritrade bit for buying Vanguard ETFs. So far I haven't been charged any fees, but I also don't keep cash in the bank side.

TD Ameritrade makes you enroll in their no-commission ETFs. You also have to enroll in their dividend reinvestment program. If you don't enroll in the no-commission bit, you'll get charged a fee. TDA will also charge you a fee if you sell before 30 days (FIFO) on the ETFs or 90 days (FIFO) on the mutual funds.

So it can be a good deal, you just have to make sure that you don't sell anything that you bought within the window. (dividend reinvestment doesn't count against you for that)

[DavidAnnArbor]

Elements Federal Credit union, elements.org, has an hsa that earns only 0.5% interest, no monthly fees,  but you can transfer money into a TD Ameritrade account. They charge a ridiculous $25 wire fee to do so. The TD Ameritrade account is free, and no fee to buy the Vanguard Total STock Market ETF.

[mousebandit]

Thank you guys for all the help!  We were going to go with Bank of America, but they aren't taking any new applications until their new and improved application website is completed, but they had no estimate of how long that would be. 

So we went with Optum.  :-) 

[MoonShadow]

If yes on payroll deduction, strongly consider this even if the HSA admin is less than ideal. Its hard to beat the immediate benefit of no payroll taxes.

Or FICA on that money, which can't happen unless it's managed by your employers' choice.  Even if the HSA admin sucks, you can just keep it in cash and roll it over the following year.  In service rollovers are the norm with HSA accounts, but you have to keep a minimum amount of cash in there anyway while you are still working with that same employer.

[mousebandit]

Yeah, there is no HSA available through employer. 

[MoonShadow]

Yeah, there is no HSA available through employer.

Then HSA Bank is alright.  I don't know about HSA Administrators.

[billatq]

So we went with Optum.  :-)

Neat, hadn't heard of them. Looks like they have a lot of great Vanguard mutual funds. What's their fee structure look like?

[ShoulderThingThatGoesUp]

@shoulder-thing - I am looking at HSA Bank (for a consumer-HSA account) and I can see that they have monthly maintenance fees and monthly investing fees ($2.50 and $3.00, respectively) that are waived when you keep "bank" account balance over $5000. 

-Does that bank account balance include "both" the available (non-invested) funds and invested funds, or just the available (non-invested) funds? 

Is TD Ameritrade charging fees on top of this?  I'm trying to understand their Fee Schedule, and I see fees for trades and fees for No-Load Mutual Funds.  I would be wanting to put everything into something like a Vanguard Index fund.  I haven't yet figured out how to view what funds they offer. 

THANK YOU!!!  I'm trying to get my head wrapped around all the new information, LOL!

MouseBAndit

I am not paying any fees, but that might be because my employer is.

[Pooperman]

My company uses Wells Fargo for the HSA admin. I think it's $2.50 a month unless your account balance is above $5k. By account balance its both the bank (which must have $1k) and the investing portion combined. They offer a 0.25% s&p500 fund that i have my money in. Not vanguard, but simple compared to the financial gymnastics of other places.