Bogleheads

mikep · Joined: 22 Apr 2009 Posts: 684

All,
I have a meeting next week with the folks in charge of selecting HSA administrators for our company HDHP. I would like to get them to have some cheaper index funds. The HSA we have is at Mellon Bank and has these options, none of which are good IMO - not even a 500 index is in the mix:

Fund Category Investment Fund Ticker

Money Market DREYFUS CASH MANAGEMENT PLUS, INC. — INVESTOR SHARES
DCVXX
Intermediate-Term Bond CALVERT INCOME FUND CLASS A
CFICX
Short-Term Bond CALVERT SHORT DURATION INC CLASS A
CSDAX
High Yield Bond FIDELITY ADV HIGH INC ADVANTAGE CLASS T
FAHYX
Short Government GOLDMAN SACHS SHORT DURATION GOVT CL A
GSSDX
World Bond TEMPLETON GLOBAL BOND CLASS A
TPINX
Mid-Cap Growth AMERICAN CENTURY HERITAGE CLASS A
ATHAX
Large Blend DREYFUS APPRECIATION FUND
DGAGX
Large Value DREYFUS PREMIER STRATEGIC VALUE CLASS A
DAGVX
Diversified Emerging Markets FIDELITY ADVISOR EMERGING MKTS CLASS A
FAMKX
Mid-Cap Blend GABELLI ASSET FUND CLASS AAA
GABAX
Large Growth MFS AGGRESSIVE GWTH ALLOCATION CLASS A
MAAGX
Foreign Large Growth MARSICO INTERNAT'L OPPORTUNITIES
MIOFX
Foreign Large Blend MFS RESEARCH INTL CLASS A
MRSAX
Small Growth FIDELITY ADVISOR SMALL CAP CLASS A
FSCDX
Small Blend KEELEY SMALL CAP VALUE FUND
KSCVX
World Stock MUTUAL SERIES MUTUAL DISCOVERY CLASS A
TEDIX
Moderate Allocation AMERICAN CENTURY STRAT ALLOC CLASS A
ACVAX
World Allocation IVY ASSET STRATEGY CLASS A
WASAX
Real Estate T ROWE PRICE REAL ESTATE FUND ADV CL
PAREX

This is from the person I have to meet with, what I am up against:

MossySF · Joined: 19 Apr 2007 Posts: 908

HSA's a personal accounts and you have the right to transfer your funds to your own account with better investments at any time. You can even take money out and deposit it manually in your new account to avoid "transfer" fees. From my reading of the rollover certificate form, you are limited to once every 12 months when doing it by hand.
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mikep · Joined: 22 Apr 2009 Posts: 684

My concern is for the average person at my company who doesn't know any better. Also it is good to use the HSA from my company to get FICA-tax exempt contributions, so I would have to wait a year before investing in the funds I want.

mikep · Joined: 22 Apr 2009 Posts: 684

bump - does anyone have any inputs?
Thanks
Mike

MossySF · Joined: 19 Apr 2007 Posts: 908

You will be hard-pressed to make any company change at this front. Even at an individual level, it is extremely hard to find good HSA investment options. I've searched far and wide even the best options require high minimums on the bank account side and/or commissions to make transactions. So you bring all pro-index research and convince the person in charge that indexing is good, now what? What HSA bank + investment option can you give him/her?

And in general, most people will use their HSA accounts to pay medical bills. They would not try to follow the strategy of protecting the HSA and paying out of taxable even if you could explain the concept to them. Hence, the minority looking to invest their HSA account is overwhelmed by the majority looking for a convenient bank account with no fees, easy bill pay and good interest.
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pshonore · Joined: 28 Jun 2009 Posts: 355

mikep · Joined: 22 Apr 2009 Posts: 684

Thanks all. I have our 401(k) team looking at these options. Maybe we can apply some pressure at least that we don't like the fees.
Does anyone have a Fidelity HSA? What are the fund choices and fees like? Our 401(k) is with Fidelity maybe we have some connection to get their HSA as well.

I would be happy if we can get some pretax contributions to HSAbank or HSAadministrators, or the Fidelity HSA if that is good, and have the employer pickup the fees. I am handcuffed to this HSA to save the FICA taxes and limited to direct rollovers once per year and/or trustee transfers at $25 a pop.

MossySF · Joined: 19 Apr 2007 Posts: 908

mikep · Joined: 22 Apr 2009 Posts: 684

grabiner · Joined: 20 Feb 2007 Posts: 2798 Location: Columbia, MD

MossySF · Joined: 19 Apr 2007 Posts: 908

mikep · Joined: 22 Apr 2009 Posts: 684

I see the Fidelity funds are "open for subsequent investments only". Do you know more the specific requirement on that? If I'm lumping in once per year from my high cost employer HSA to this one is that subsequent enough ?

I am also concerned on the $50 annual fee if no investment activity. Also it seems they require a $3000 minimum in the bank account to avoid maintenance fees. (David, maybe you want to link to this page as well from the wiki?)

https://secure.thebancorphsa.c....ngsaccount

mikep · Joined: 22 Apr 2009 Posts: 684

David,

I have a suggestion for the wiki, for those who want to invest their HSA in the 4 states that tax the HSA growth. A statement that placing the treasuries/TIPS of their overall allocation in their HSA would be helpful, as the dividend income of these are exempt from state tax although fund capital gains would probably be state taxed. There are other short/intermediate treasury funds in the Bancorp pdf, and these are also available at HSA bank. If treasuries/TIPS are in an IRA or 401(k) instead the states tax it upon withdrawal.

Or if their AA doesn't call for treasuries/TIPS, or if they would rather invest in equity funds, investing the HSA in something tax efficient would be a good idea to postpone the state tax as long as possible (or eliminate if they move to another state). Also, while I am not sure I think one could TLH in an HSA off of their state tax in these situations as well.

Thanks.
Mike

eurowizard · Joined: 10 May 2008 Posts: 844

I'd strongly consider seeing if they can switch HSA custodians to Alliant Credit Union. Currently yielding 3% on HSA accounts. It's been 3% for several months. It was 4% for the last few years.

I dont think people need to be equity investing in their HSAs. Also even bogleheads need some bonds in their AA. So just treat the 3% as a short term bond for purposes of your AA and keep the stocks someplace else.

I can't get a guaranteed 3% liquid investment vehicle anywhere but this HSA. It's a special rate that alliant offers. I have good faith in alliant to keep it high. It's been 3% now for around 4 months I think.

Patelco used to offer 5% HSA accounts until 5 months ago when they dropped it to 2%. They cut their yield by 60% and Alliant cut it by 25%.

MossySF · Joined: 19 Apr 2007 Posts: 908

There is a trick around the fees. A direct deposit will let you keep less than $3000 in the bank side without incurring the monthly charge. Someone else has previously posted they did an automated ACH of $5 each month from their regular bank account to fulfill this requirement. This does mean (1) your source HSA allows ACH out with no fees or (2) your employer is contributing less than the IRS max each year allowing you to fill in with an ACH from a non-HSA account.

I don't think you can get around the $1000 bank balance minimum to open a brokerage account though.

In any case, I think eurowizard is on a better track. Build up more cash before you think of investing HSA money. It really isn't that big of a deal if you have to let money sit for 2 or 3 years.
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grabiner · Joined: 20 Feb 2007 Posts: 2798 Location: Columbia, MD

mikep · Joined: 22 Apr 2009 Posts: 684

Hi All:
Thank you for all who posted on this thread. We had a productive meeting with our HR dept. today to improve the HSA choices. Since we are with Mellon, I specifically suggested the Dreyfus index funds mentioned toward the bottom of the thread along with Dreyfus TIPS (0.30% institutional) and intermediate treasury (0.65%). They will take back to Mellon to see if those can be added.