New to HSAs

[jflo]

I changed jobs and it worked out way better to get my husband and HDHP than go on the health insurance offered through the new employer. The HDHP is HSA eligible so we'd like to get one to use as a retirement account for him -  he never gets sick and is currently self-employed and not contributing to a 401k (we're maxing my contributions).
I'm fairly new to investing (only used employer programs since I'm busy paying off a big student loan) but thought it would be best to go w/ a fund that allows us to invest in Vanguard since I'm a fan of low fees.  So I look at who they recommend, Health Savings Administrators, and see they have a $45/yr fee.  This seems really high.  I poked around online and fees seem to be an issue with HSAs as are some other administrative problems.
Thoughts from folks with recent experience?  Is this high for an investment vehicle?  Better options for investing a 3-5k a year?
Thanks.

[arebelspy]

$45/yr out of $3k = 1.5%, not ideal.  Still, if it's a flat rate, as your HSA grows that shrinks as a percentage of it.

HSAs though in general are pretty sweet.

My favorite HSA article, is here: http://www.madfientist.com/ultimate-retirement-account/

Keep in mind that HSAs are changing/potentially going away with the Affordable Care Act/"Obamacare", so this may all be a moot point.

[jflo]

Thanks for the article - feeling better about the hassle, but will keep looking for lower fees.

[CB]

My HSA investment account charges $20/year but once your balance is above a certain value ($10k for mine) the fee goes away.  Likewise the savings account charges $3/month until you reach a balance of $5k.  Does yours have something similar? If you're not happy with the charges, I think it's possible to roll your existing HSA balance to a less fee-greedy company, even while you're still working for your current employer.

And related to arebelspy's comment about HSA going away, you should be good for 2014 but beyond that is anyone's guess.  I'd recommend maxing out your contributions ($6,450/year for a family, $3,250 for an individual).

[madage]

I think it's possible to roll your existing HSA balance to a less fee-greedy company, even while you're still working for your current employer.

Definitely possible, and usually not too hard to do. I transferred some money earlier this year from a bank account to an HSA investment account at a different custodian. Paperwork gets submitted to the receiving custodian and they handle the transfer. Note that there is a difference between transfers and rollovers. Quoting from the IRS:

Rollovers

A rollover is a tax-free distribution (withdrawal) of assets from one HSA or Archer MSA that is reinvested in another HSA. Generally, you must complete the rollover within 60 days after you received the distribution. An HSA can only receive one rollover contribution during a 1-year period. See Pub. 590, Individual Retirement Arrangements (IRAs), for more details and additional requirements regarding rollovers.

Note.

If you instruct the trustee of your HSA to transfer funds directly to the trustee of another HSA, the transfer is not considered a rollover. There is no limit on the number of these transfers. Do not include the amount transferred in income, deduct it as a contribution, or include it as a distribution on line 14a.

And related to arebelspy's comment about HSA going away, you should be good for 2014 but beyond that is anyone's guess.  I'd recommend maxing out your contributions ($6,450/year for a family, $3,250 for an individual).

Note that, because only your husband is covered by the HSA, the contribution limit is $3,250 for 2013. These monies, however, CAN be used to pay for any medical expenses incurred by a spouse or dependents, provided you jointly file your taxes.

[jflo]

Thanks. You're right about the max but if we do the max now and max early 2014 perhaps we can avoid fees sooner if we find an account that starts waiving fees around 5k.

[madage]

Thanks. You're right about the max but if we do the max now and max early 2014 perhaps we can avoid fees sooner if we find an account that starts waiving fees around 5k.

You can also start a HSA at a bank or credit union with low or no fees as you build the balance. I use Alliant Credit Union. Not much interest, but some interest is better than paying a fee.

[fiveoh]

I think it's possible to roll your existing HSA balance to a less fee-greedy company, even while you're still working for your current employer.

Definitely possible, and usually not too hard to do. I transferred some money earlier this year from a bank account to an HSA investment account at a different custodian. Paperwork gets submitted to the receiving custodian and they handle the transfer. Note that there is a difference between transfers and rollovers. Quoting from the IRS:

Rollovers

A rollover is a tax-free distribution (withdrawal) of assets from one HSA or Archer MSA that is reinvested in another HSA. Generally, you must complete the rollover within 60 days after you received the distribution. An HSA can only receive one rollover contribution during a 1-year period. See Pub. 590, Individual Retirement Arrangements (IRAs), for more details and additional requirements regarding rollovers.

Note.

If you instruct the trustee of your HSA to transfer funds directly to the trustee of another HSA, the transfer is not considered a rollover. There is no limit on the number of these transfers. Do not include the amount transferred in income, deduct it as a contribution, or include it as a distribution on line 14a.

And related to arebelspy's comment about HSA going away, you should be good for 2014 but beyond that is anyone's guess.  I'd recommend maxing out your contributions ($6,450/year for a family, $3,250 for an individual).

Note that, because only your husband is covered by the HSA, the contribution limit is $3,250 for 2013. These monies, however, CAN be used to pay for any medical expenses incurred by a spouse or dependents, provided you jointly file your taxes.

Holy smokes I didn't know you can use an HSA to pay for a spouse or dependents expenses even if they aren't on the HSA?!?  Does that include pregnancy/childbirth expenses as well?  I've been saving all my medical receipts to cash out of the HSA at a future date but I guess I need to start saving my wife and child's as well...

[seattlecyclone]

Yes, you can use your HSA for any medical expenses, for any family member. My wife funded an HSA from her employer's health plan, but when I switched jobs it turned out to be cheaper for us both to be on my employer's health plan. We can use the HSA until the funds are gone, paying all the medical/dental bills for both of us, even though she was the only one who was ever covered by an HDHP.

[jarts98]

My HSA is with Health Savings Administrators and I'll admit that I don't care for their fees.  At some point the fees should be waived if your balance reaches $XXk, but it doesn't.

That having been said, I still like them because I can invest in great Vanguard funds (which is why I went with Health Savings Administrators).  When you factor in the low fees in the funds, it helps offset the HSA fees vs. other administrators that may charge less, but the funds you'd invest in have higher fees.  My overall cost (fees from Health Savings Administrators + the fund fees) are lower than other options I've found.  This would only be the case if you plan to pay your medical bills with other funds and leave the money in the HSA to grow tax free/deferred.

If you intend to seek reimbursement from the HSA for your medical bills, I'd look somewhere other than Health Savings Administrators.  There are better options with lower fees.

[jflo]

Thanks jarts - helpful feedback.

[jrhampt]

I was considering switching to an HSA this fall...but why would HSAs possibly be going away as a result of healthcare reform?  Do they not meet minimum coverage standards, or is there some other reason?

[CB]

I was considering switching to an HSA this fall...but why would HSAs possibly be going away as a result of healthcare reform?  Do they not meet minimum coverage standards, or is there some other reason?

My impression was that, as currently structured, they couldn't meet actuarial value requirements for a "bronze" plan.  Employer-sponsored ones sound like they're okay as long as the employer is contributing (HHS decided that employer contributions could be included in the actuarial value calculation).  Last I heard it sounded like deductibles and out-of-pocket maximums might have to come down (which would increase premiums).  Not sure how outdated my information is, though.

I'm hoping that at some point the rules will be relaxed so that lower-actuarial value HSA-based plans (maybe they can call them "aluminum" or "tinfoil" plans?) can also be sold on the exchanges.  Lots of uncertainty over what the next couple of years will hold.

[CorpRaider]

HSABank seems relatively ok with the fees, you can link a TD AMTD investment account with a fair amount of no trading fee vanguard ETFS.