HSA Custodian Research

I'll be opening my HSA account next week.* The choices I'm looking at so far are these:

HSA Bank:

I could put the money in any mutual fund, although this involves going through a HarrisDirect brokerage.* *This seems messy, and I've been on hold for HarrisDirect for about 10 minutes now.*

Saturna

I could put the money in one of their five or so mutual funds.

Patelco

They offer a 5.00% (5.12% APY) account, and the only fee is the setup fee of $20.* That rate changes monthly.

	Setup	Annual	Exp (4K)	TransFee	Total
Sterling	35	30	20	0	85
HSA Bank	18	30	0	19.95	67.95
Saturna	0	0	48	0	48
Patelco	20	0	0	0	20
HSA Admin	20	35	24.5	0	79.5

Any thoughts on this?

[brewer12345]

How difficult is it to roll the money to somewhere else?

5% seems pretty attractive...

[REWahoo]

T-Al, I've been looking at HSA's also as that's the way I may be going once Cobra runs out in November. Of the three options you listed, my personal preference would probably be Patelco. Yes, you have no choice for your investments, but the fact that Patelco is a CU will probably lessen the number and severity of service fees compared to what you might pay in more profit-driven banks. And 5+% isn't too shabby.

That said, Patelco is a very large CU, and my experience working for a company that was a supplier to CU's and banks was the larger the CU, the more "bank-like".

Right, I generally stay away from banks.

They said there are no fees to roll it over to a different HSA administrator.

Here's a question on Patelco: What's to stop them from dropping the interest rate to 2% next month?

[brewer12345]

Originally Posted by TromboneAl

Right, I generally stay away from banks.

They said there are no fees to roll it over to a different HSA administrator.

Here's a question on Patelco:* What's to stop them from dropping the interest rate to 2% next month?

That fact that you could roll the money over any time you like. That's about it.

[eridanus]

Whoa!

"This institution is not federally insured, and if the institution fails, the Federal Government does not guarantee that depositors will get back their money. Accounts with this institution are not insured by any state government."

A musician in town lost his HSA savings when his trustee went bankrupt. Be careful. It can happen.

[REWahoo]

Originally Posted by eridanus

"This institution is not federally insured, and if the institution fails, the Federal Government does not guarantee that depositors will get back their money. Accounts with this institution are not insured by any state government."

Seems Patelco, who was insured by the FDIC, withdrew from federal coverage in 2002 and now accounts are insured by a private company:

http://www.bizjournals.com/sanfranci...wscolumn3.html

[lazyday]

Al,

You based the expenses on 4K, but are you planning to spend from the account, or let it accumulate the max each year?

Also, in the expenses for Saturna, you might also need to consider hidden expenses. I used to add the ER and turnover ratio together as a first approximation of total expenses, though it can depend on market cap and investing style.

Thanks for keeping us up to date on your HSA search.
Still on my to do list.

I plan to put the money in there and not touch it until age 65 or later.

The lack of FDIC insurance is noteworthy. Of course Saturna isn't insured, and neither is , for example, Vanguard. Why would I be more at risk at Patelco?

[eridanus]

Vanguard is insured by the SIPC.

[cute fuzzy bunny]

Originally Posted by TromboneAl

I've been on hold for HarrisDirect for about 10 minutes now.

Remember...your presales customer support level and response time are usually a lot better than your postsales ones...

[lazyday]

Originally Posted by TromboneAl

I plan to put the money in there and not touch it until age 65 or later.

So, as you keep contributing, and if assets appreciate, the excess expenses over VG multiply.
When I posted last time, I may have misread the $48 in your table as annual expenses coming from the ER of the mutual funds at Saturna... is that a transaction fee?

Originally Posted by TromboneAl

The lack of FDIC insurance is noteworthy. Of course Saturna isn't insured, and neither is , for example, Vanguard. Why would I be more at risk at Patelco?

I could be wrong, but I think most CDs are FDIC (or credit union near-equivalent) insured, so you have the US gvnt backing you. Maybe not quite as safe as treasury bonds, but pretty safe.
An uninsured CD, I'd put much less faith into.
But, I don't know much about fixed-income.

Maybe Swensen's book has influenced me too much, but here's my perspective:
If I'm going to take the long run hit on returns (relative to stocks) by buying fixed income, I want my money to be safe. Unless the US government falls, I should be paid.

An uninsured money market fund or cd may seem safe, but if a 1 in 100 year event would make you lose all your money, then an extra .5% yield isn't compensating you for the risk.
(Assuming:
-a 1 in X chance per year that US government fails,
-and an additional 1 in 100 chance per year that US government doesn't fail, but you lose all your money in the uninsured account.)

If you think I'm being paranoid, think about the long-term-capital-mgt fiasco a few years ago, and think of what could happen over the next 100 years. What if you're unlucky, and the "big one" comes in the next 10?

I may have misread the $48 in your table as annual expenses coming from the ER of the mutual funds at Saturna... is that a transaction fee?

Yes, I believe that's from the 1.2% expense ratio. I made that part of the chart a few months ago, so I don't remember for sure.

Current thinking:

With HSA Bank I'd have to endure either super low interest rates or high complexity and poor customer service.

I'd go with Patelco, but I'd have the concern of possibly inadequate insurance.

With Saturna, I'd have to live with a high expense ratio (1.2 % vs. .6% at Vanguard).

So, I'm leaning towards Saturna, using their Sextant International Fund.

What are the pitfalls of working with a small company like that?

Here are some more findings, for others who are investigating this:

1. If you are using www.hsainsider.com to find HSA companies, note that the companies displayed will vary depending on your zip code, although I see no indication that you cannot use any of these national companies.

2. Saturna is the only company that I've found so far that let's you simply put the funds into a mutual fund without having to go through a third-party brokerage.

3. Almost every HSA custodian has extremely low interest rates (such as .75%) until you have, say, $15,000 in your HSA account (then you may get 3.82%).

Just found a company that lets you easily invest your money in Vanguard funds: www.hsaadministrators.com.*

They have a setup fee of $20, an annual fee of $35 ($60 for a family HSA), and a .125% of balance fee.* So for the first year, figuring $4000 and a Vanguard fund with a .6% ER, the total fee would be $79.50.

Just called HSA Administrators, and got through to a very knowledgeable person right away. No phone menu.

[AnemicOak]

So who did you end up going with? (Sorry if it's mentioned in another thread)

I've got a Blue Cross HDHP (Options Blue) and plan to get an HSA setup in the next couple of weeks (I've put it off for to long).* I basically see it as a second IRA.


Patelco seems nice, but the insurance thing seems a bit scarry.* HSA Administrators is nice in that they offer Vanguard funds (but ouch on the expense add on) of course that's not insured either, but I'm a big Vanguard fan.*They seem the best of the three places I found offering Vanguard funds. The place BCBS of MN uses has no fees once the balance is $750, but it's got crappy returns (.5%, 1%) until the balance gets big.

I really wish someone like Vanguard would offer something directly.


Thanks,
Brian