HSA Fee & Transfer Question

[medelste]

Hi!

2016 is the first year my employer offered an HSA with a HDHP and we chose it because we are relatively young and healthy (knock wood) and the tax efficiency is great.

The HSA fund adminstrator (UMB) charges $3/month ($36/year) to invest HSA funds and my employer covers that fee for its employees. A commenter on a blog post about HSAs wrote that once his wife retired, her employer stopped covering that fee and the fee started getting pulled out of the assets in the account each month. My plan is to retire this year. $36/year would be about another 0.65% annual expense that I'd very muc like to avoid. If my employer also stops covering that fee for me once retired, can I transfer my HSA to another fund administrator? If so, do you know any that don't charge a fee?

 

[Gone4Good]

Yes, you can transfer your HSA to another provider. No, I don't know of any without a fee that also offer good investment choices. HSAs are one area of personal finance where low fee options don't seem to exist.

HSA Administrators is a company people often recommend because they're one of the few (only?) to offer low-cost Vanguard funds as investments. They do charge an admin fee, though, and it gets pulled out of your principal balance each year.

For me, the lower expense ratio funds, the nearly $7K annual tax deduction, and on-going tax sheltering of investment income more than compensates for the HSA Administrators fees and the headaches in dealing with a company / website that isn't terribly consumer friendly.

Edit to add: HSA Admin's fees are higher than the ones you mention. They charge a flat $45 per year plus another 25bp "custodial fee."

 

[Senator]

If my employer also stops covering that fee for me once retired, can I transfer my HSA to another fund administrator? If so, do you know any that don't charge a fee?

My employer has a HSA that has no fees, once you reach a certain level. I think it is only ~$2500. Yours may be the same.

*If your HDHP coverage status or employment status changes, any applicable monthly maintenance fee of $3.25 may be charged against your HSA. "The HSA Service fee will be waived when the average daily balance exceeds $2,500.00"

 

[medelste]

My employer has a HSA that has no fees, once you reach a certain level. I think it is only ~$2500. Yours may be the same.

Hopefully other readers' HSA plans have that benefit, too, but unfortunately mine (UMB) does not appear to waive fees at an certain level of assets.

https://hsa.umb.com/groups/public/documents/web_content/054063.pdf

 

[Sojourner]

There are a few HSA plans out there that don't charge maintenance fees, but those plans do not have good investment options (like Vanguard funds, etc.). One that I found is offered by Connexus credit union. If all you're looking for is a place to put some money to cover health care expenses, then it's a good option since it pays 1.5% on balances over $5000. The way I look at it, putting some cash in this kind of account is pretty much equivalent to keeping it in a high-yield checking or savings account. In other words, it's money I wouldn't be putting in higher risk investments anyway, so why not keep it in a basic, no-frills, no-fees HSA in case I need it for health care expenses?

 

[dixonge]

$36/year would be about another 0.65% annual expense that I'd very muc like to avoid.

OK, I know you've really come a long way from your first post on the boards, but are you saying that your annual expenses are now projected to be below $6,000?

 

[medelste]

OK, I know you've really come a long way from your first post on the boards, but are you saying that your annual expenses are now projected to be below $6,000?

I'm probably not looking at this the right way, but I don't understand what my annual living expenses have to do with my question. Can you help me understand?

I'm just thinking about this one $5,500 pot of money that I will keep in my HSA investment account where $36/year will be charged. (I will only be contributing one year to the HSA account due to my retirement later this year.) So I'm seeing that $36 annual fee eating away at my $5,500 - a starting 0.65% annual expense - over 30+ years. That recurring fee will greatly affect the account's terminal value. If I can move my HSA account to a company that will not charge $36/year and that also has low cost mutual funds, I'd much rather do that. Of course, there's no telling whether my current or future investment account provider will raise or lower those fees in the future.

Is there something wrong with my thinking?

 

[dixonge]

I'm probably not looking at this the right way, but I don't understand what my annual living expenses have to do with my question. Can you help me understand?

I'm just thinking about this one $5,500 pot of money that I will keep in my HSA investment account where $36/year will be charged. (I will only be contributing one year to the HSA account due to my retirement later this year.) So I'm seeing that $36 annual fee eating away at my $5,500 - a starting 0.65% annual expense - over 30+ years. That recurring fee will greatly affect the account's terminal value. If I can move my HSA account to a company that will not charge $36/year and that also has low cost mutual funds, I'd much rather do that. Of course, there's no telling whether my current or future investment account provider will raise or lower those fees in the future.

Is there something wrong with my thinking?

Oh - so .65% of the HSA account! Got it. I completely misunderstood that part...

I know pretty much *zero* about HSA's so I'll just bow out and read now