HSA Questions

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goblue100
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HSA Questions

Post by goblue100 »

For the third time in 5 years my employer has switched my HSA to a new company. This time it is WageWorks instead of 5th Third Bank. While I wasn't in love with 5th Third bank and the investment options were not great, at least they only charged me $2 a month. With WW it is going to $7 a month. So I have two questions:
1. For next year can I elect to not have any money withheld directly from my paycheck and just set up my own HSA with the provider of my choice and fund it after tax, and get the tax deduction at the end of the year?
2. Provided the answer to question 1 is yes, anyone have an HSA provider they like, with decent investment options and low fees?

Thanks in advance
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niceguy7376
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Re: HSA Questions

Post by niceguy7376 »

If you are contributing through your paycheck, you will be saving SS+medicare taxes also (employer also would be saving the same amount). That equates to 7.65% for you and 7.65% for your employer. The federal and state tax (some states dont provide the tax benefit) savings can be had even with after tax contributions.

If your employer is not contributing to HSA, then you can contribute the max of 6550. If you do it through your paycheck to the HSA provider of your employer, you are saving $500. At an extra cost of $5 a month (if all else like investment options are same between the new and old), this would take care of your yearly extra fee of $60 and still leave a lot.

Every new year, the same savings will start afresh.

Thus, look at investment options and then make a decision. If you could transfer from employer provider to another, maybe once a year, and pay a flat fee of $50 or $75 and then invest it at another provider, you might still save at the end of the day.
Spirit Rider
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Re: HSA Questions

Post by Spirit Rider »

niceguy7376 wrote:Thus, look at investment options and then make a decision. If you could transfer from employer provider to another, maybe once a year, and pay a flat fee of $50 or $75 and then invest it at another provider, you might still save at the end of the day.
If you are doing it only once a year, you can do an indirect rollover for free by simply writing a check to the second HSA custodian. Just make sure it is properly coded as a rollover.
kaneohe
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Re: HSA Questions

Post by kaneohe »

Spirit Rider wrote:
niceguy7376 wrote:Thus, look at investment options and then make a decision. If you could transfer from employer provider to another, maybe once a year, and pay a flat fee of $50 or $75 and then invest it at another provider, you might still save at the end of the day.
If you are doing it only once a year, you can do an indirect rollover for free by simply writing a check to the second HSA custodian. Just make sure it is properly coded as a rollover.
and if you are doing the indirect rollover, be sure that all rollovers are spaced at least 1yr (12 mos/365+ days) apart e.g. if you do one in Feb of this yr, and then the next in Jan next yr, you have violated the rule.
Topic Author
goblue100
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Re: HSA Questions

Post by goblue100 »

Thanks for the info, everyone. I had not considered the SS+ medicare tax.
"Confusion has its cost" - Crosby, Stills and Nash
jane1
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Re: HSA Questions

Post by jane1 »

niceguy7376 wrote:If you are contributing through your paycheck, you will be saving SS+medicare taxes also (employer also would be saving the same amount). That equates to 7.65% for you and 7.65% for your employer. The federal and state tax (some states dont provide the tax benefit) savings can be had even with after tax contributions.

If your employer is not contributing to HSA, then you can contribute the max of 6550. If you do it through your paycheck to the HSA provider of your employer, you are saving $500. At an extra cost of $5 a month (if all else like investment options are same between the new and old), this would take care of your yearly extra fee of $60 and still leave a lot.

Every new year, the same savings will start afresh.

Thus, look at investment options and then make a decision. If you could transfer from employer provider to another, maybe once a year, and pay a flat fee of $50 or $75 and then invest it at another provider, you might still save at the end of the day.
If you reach the income limit ($117K in 2014) for SS tax, the savings is about $100 (medicare only). Correct?
ajcp
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Re: HSA Questions

Post by ajcp »

Spirit Rider wrote:
niceguy7376 wrote:Thus, look at investment options and then make a decision. If you could transfer from employer provider to another, maybe once a year, and pay a flat fee of $50 or $75 and then invest it at another provider, you might still save at the end of the day.
If you are doing it only once a year, you can do an indirect rollover for free by simply writing a check to the second HSA custodian. Just make sure it is properly coded as a rollover.
What do you mean by properly coded? Do you tell your employer provider that you're doing a rollover?
kaneohe
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Re: HSA Questions

Post by kaneohe »

ajcp wrote:
Spirit Rider wrote:
niceguy7376 wrote:Thus, look at investment options and then make a decision. If you could transfer from employer provider to another, maybe once a year, and pay a flat fee of $50 or $75 and then invest it at another provider, you might still save at the end of the day.
If you are doing it only once a year, you can do an indirect rollover for free by simply writing a check to the second HSA custodian. Just make sure it is properly coded as a rollover.
What do you mean by properly coded? Do you tell your employer provider that you're doing a rollover?
If you are writing a check and doing an indirect rollover, the employer does not know (or care) what you are doing.
You are responsible for reporting the distribution and rollover here http://www.irs.gov/pub/irs-pdf/f8889.pdf in Pt II.
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grabiner
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Re: HSA Questions

Post by grabiner »

jane1 wrote:If you reach the income limit ($117K in 2014) for SS tax, the savings is about $100 (medicare only). Correct?
Yes, this is correct. While more SS is deducted early in the year because you aren't contributing to the HSA by payroll deduction, you will reach the limit faster, so your total SS tax will be the same whether you use the HSA or not.

Thus, if it's only $100, and you avoid a cost of $7 per month plus a transfer fee of $50, it's better not to use payroll deduction. Another benefit is that you can make the whole contribution early in the year and get it invested in stock or bonds immediately.
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SteelyEyed
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Re: HSA Questions

Post by SteelyEyed »

grabiner wrote:
jane1 wrote:If you reach the income limit ($117K in 2014) for SS tax, the savings is about $100 (medicare only). Correct?
Yes, this is correct. While more SS is deducted early in the year because you aren't contributing to the HSA by payroll deduction, you will reach the limit faster, so your total SS tax will be the same whether you use the HSA or not.

Thus, if it's only $100, and you avoid a cost of $7 per month plus a transfer fee of $50, it's better not to use payroll deduction. Another benefit is that you can make the whole contribution early in the year and get it invested in stock or bonds immediately.
That's why our health insurance and HSA are in my wife's name. She's below the cap and I am not. If you are in a similar situation with your spouse, consider it.
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grabiner
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Re: HSA Questions

Post by grabiner »

SteelyEyed wrote:
jane1 wrote:If you reach the income limit ($117K in 2014) for SS tax, the savings is about $100 (medicare only). Correct?
That's why our health insurance and HSA are in my wife's name. She's below the cap and I am not. If you are in a similar situation with your spouse, consider it.
I never thought of this, and it doesn't apply to me because I am unmarried, but this is a useful tip which I was about to add to the wiki until I saw that it was already added a few weeks ago.
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goblue100
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Re: HSA Questions

Post by goblue100 »

Dang, I hate being the guy that should have read the FAQ or the Wiki, but here I am. :oops:

Thanks for pointing me to it. I am below SS max and live in a low tax state, Texas. Sounds like I will check into the yearly roll over option.

WiKi:
You are able to move money between HSA custodians through direct rollovers and trustee to trustee transfers - see IRS Pub. 969 page 6. The rules are exactly the same as IRA Rollovers and Transfers. You may want to do this annually if you contribute to a plan through your employer's payroll deduction to gain the social security and medicare payroll tax exemption, but you don't want to leave the funds there long-term if the investment options are not good. The HSA custodian(s) may charge a fee for a trustee-to-trustee transfer; direct rollovers can usually be done without a fee.
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kaneohe
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Re: HSA Questions

Post by kaneohe »

goblue100 wrote:Dang, I hate being the guy that should have read the FAQ or the Wiki, but here I am. :oops:

Thanks for pointing me to it. I am below SS max and live in a low tax state, Texas. Sounds like I will check into the yearly roll over option.

WiKi:
You are able to move money between HSA custodians through direct rollovers and trustee to trustee transfers - see IRS Pub. 969 page 6. The rules are exactly the same as IRA Rollovers and Transfers. You may want to do this annually if you contribute to a plan through your employer's payroll deduction to gain the social security and medicare payroll tax exemption, but you don't want to leave the funds there long-term if the investment options are not good. The HSA custodian(s) may charge a fee for a trustee-to-trustee transfer; direct rollovers can usually be done without a fee.
I wonder if the author of the wiki really intended to use the descriptor "direct" with rollover. The wiki as written appears (by omission) to exclude the indirect rollover as a means of moving between HSA custodians (although it is not explicitly stated as such). My own limited personal experience is that if a custodian will charge for a direct transfer,they will also charge for a direct rollover but not for an indirect rollover.
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Don Christy
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Re: HSA Questions

Post by Don Christy »

kaneohe wrote:
goblue100 wrote:Dang, I hate being the guy that should have read the FAQ or the Wiki, but here I am. :oops:

Thanks for pointing me to it. I am below SS max and live in a low tax state, Texas. Sounds like I will check into the yearly roll over option.

WiKi:
You are able to move money between HSA custodians through direct rollovers and trustee to trustee transfers - see IRS Pub. 969 page 6. The rules are exactly the same as IRA Rollovers and Transfers. You may want to do this annually if you contribute to a plan through your employer's payroll deduction to gain the social security and medicare payroll tax exemption, but you don't want to leave the funds there long-term if the investment options are not good. The HSA custodian(s) may charge a fee for a trustee-to-trustee transfer; direct rollovers can usually be done without a fee.
I wonder if the author of the wiki really intended to use the descriptor "direct" with rollover. The wiki as written appears (by omission) to exclude the indirect rollover as a means of moving between HSA custodians (although it is not explicitly stated as such). My own limited personal experience is that if a custodian will charge for a direct transfer,they will also charge for a direct rollover but not for an indirect rollover.
I believe you're confusing rollover with trustee to trustee transfer. There's really no direct or indirect rollover, just a rollover. A rollover is distinct from a trustee transfer.
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Re: HSA Questions

Post by LadyGeek »

FYI- new member Velodon is asking about rolling over from a 401(k) into an HSA. I moved the question into a new thread. See: HSA Questions [Rolling over]
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