Open personal HSA or use company HSA?

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pgold
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Open personal HSA or use company HSA?

Post by pgold » Mon Feb 11, 2019 6:44 pm

Hello. Does it makes sense to open a personal HSA account instead of using what my current employer (HSA Bank) provides?
Also, I just switched jobs so I have a different HSA account from my previous employer (Bank of America).
Thank you! :)

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RickBoglehead
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Re: Open personal HSA or use company HSA?

Post by RickBoglehead » Mon Feb 11, 2019 6:53 pm

Only if you want to pay with after-tax dollars... Company HSA is pre FICA tax .
Last edited by RickBoglehead on Mon Feb 11, 2019 7:08 pm, edited 1 time in total.
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InMyDreams
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Re: Open personal HSA or use company HSA?

Post by InMyDreams » Mon Feb 11, 2019 7:04 pm

RickBoglehead wrote:
Mon Feb 11, 2019 6:53 pm
Only if you want to pay with after-tax dollars... Company HSA is pre tax .
Perhaps you mean pre-FICA dollars? Contributions made thru payroll deduction are both pre-FICA and pre-income tax.

Contributions made by an individual to an HSA are only pre-income tax.

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pgold
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Re: Open personal HSA or use company HSA?

Post by pgold » Mon Feb 11, 2019 7:07 pm

RickBoglehead wrote:
Mon Feb 11, 2019 6:53 pm
Only if you want to pay with after-tax dollars... Company HSA is pre tax .
I'm reading posts about HSA and people sometimes talk about choosing where to open HSA (e.g. Elements, Lively, etc). Or am I not understanding it correctly?

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RickBoglehead
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Re: Open personal HSA or use company HSA?

Post by RickBoglehead » Mon Feb 11, 2019 7:08 pm

InMyDreams wrote:
Mon Feb 11, 2019 7:04 pm
RickBoglehead wrote:
Mon Feb 11, 2019 6:53 pm
Only if you want to pay with after-tax dollars... Company HSA is pre tax .
Perhaps you mean pre-FICA dollars? Contributions made thru payroll deduction are both pre-FICA and pre-income tax.

Contributions made by an individual to an HSA are only pre-income tax.
Correct.
pgold wrote:
Mon Feb 11, 2019 7:07 pm
RickBoglehead wrote:
Mon Feb 11, 2019 6:53 pm
Only if you want to pay with after-tax dollars... Company HSA is pre FICA tax .
I'm reading posts about HSA and people sometimes talk about choosing where to open HSA (e.g. Elements, Lively, etc). Or am I not understanding it correctly?
If company does not provide. Otherwise, losing that FICA discount is crazy.
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emlowe
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Re: Open personal HSA or use company HSA?

Post by emlowe » Mon Feb 11, 2019 7:13 pm

You can also transfer from one provider to another using either a trustee to trustee transfer or a rollover.

For example, your company uses HSA provider "A" and your contributions go directly into there - this is pre-FICA and pre-tax. Keep these contributions in the HSA cash account.

You can then transfer from "A" to a Fidelity HSA (for example) - and invest in your cheap index funds.

You can decide how often you want to transfer - technically you can do unlimited trustee to trustee transfers. You can also do a "rollover contribution" once a year.

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pgold
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Re: Open personal HSA or use company HSA?

Post by pgold » Tue Feb 12, 2019 7:38 pm

Thanks for all the response. I've decided to open a Lively HSA account and move all my funds in there. I'll keep contributing through my employer to get all the tax benefits and just transfer it to Lively every now and then. Thank you!

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Re: Open personal HSA or use company HSA?

Post by drk » Tue Feb 12, 2019 7:41 pm

pgold wrote:
Tue Feb 12, 2019 7:38 pm
Thanks for all the response. I've decided to open a Lively HSA account and move all my funds in there. I'll keep contributing through my employer to get all the tax benefits and just transfer it to Lively every now and then. Thank you!
Wait! I’d encourage you to check out Fidelity’s HSA, which is fee-free and offers access to Fidelity’s line-up of funds rather thatn TDA’s.

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pgold
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Re: Open personal HSA or use company HSA?

Post by pgold » Tue Feb 12, 2019 7:43 pm

drk wrote:
Tue Feb 12, 2019 7:41 pm
Wait! I’d encourage you to check out Fidelity’s HSA, which is fee-free and offers access to Fidelity’s line-up of funds rather thatn TDA’s.
Ah. Will do. Thanks for the suggestion. I'll let you know what I choose between the two. :)

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FiveK
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Re: Open personal HSA or use company HSA?

Post by FiveK » Tue Feb 12, 2019 7:57 pm

RickBoglehead wrote:
Mon Feb 11, 2019 7:08 pm
If company does not provide. Otherwise, losing that FICA discount is crazy.
Not necessarily.

See To those who avoid FICA with HSA payroll contributions - Bogleheads.org for more.

tmcc
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Re: Open personal HSA or use company HSA?

Post by tmcc » Tue Feb 12, 2019 8:32 pm

Not to hijack the conversation but I had a thought ....


So in theory, you could be enrolled in the employer HDHP but not contribute to the HSA through the employer plan.

Then, separately, you could contribute after tax to your own account and still reap all of the federal tax benefits, correct? Would SSC wages and medicare wages be overstated?

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Re: Open personal HSA or use company HSA?

Post by nolesrule » Tue Feb 12, 2019 8:47 pm

tmcc wrote:
Tue Feb 12, 2019 8:32 pm
Not to hijack the conversation but I had a thought ....


So in theory, you could be enrolled in the employer HDHP but not contribute to the HSA through the employer plan.

Then, separately, you could contribute after tax to your own account and still reap all of the federal tax benefits, correct? Would SSC wages and medicare wages be overstated?
Payroll deductions for contributions to an HSA reduce your SS and Medicare wages and associated taxes. Making the contribution yourself outside of payroll does not. So the wages are different, but neither is overstated.

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FiveK
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Re: Open personal HSA or use company HSA?

Post by FiveK » Tue Feb 12, 2019 8:48 pm

tmcc wrote:
Tue Feb 12, 2019 8:32 pm
Not to hijack the conversation but I had a thought ....

So in theory, you could be enrolled in the employer HDHP but not contribute to the HSA through the employer plan.

Then, separately, you could contribute after tax to your own account and still reap all of the federal tax benefits, correct?
All except (assuming you see this as a benefit) avoiding FICA tax on the HSA contribution amount.
Would SSC wages and medicare wages be overstated?
Assuming that SSC means Social Security, "no". Why would they be?

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Re: Open personal HSA or use company HSA?

Post by tmcc » Tue Feb 12, 2019 8:52 pm

FiveK wrote:
Tue Feb 12, 2019 8:48 pm
tmcc wrote:
Tue Feb 12, 2019 8:32 pm
Not to hijack the conversation but I had a thought ....

So in theory, you could be enrolled in the employer HDHP but not contribute to the HSA through the employer plan.

Then, separately, you could contribute after tax to your own account and still reap all of the federal tax benefits, correct?
All except (assuming you see this as a benefit) avoiding FICA tax on the HSA contribution amount.
Would SSC wages and medicare wages be overstated?
Assuming that SSC means Social Security, "no". Why would they be?
HSA contributions as a payroll deduction are exclusions from Medicare and social security taxes. If you contribute after tax, your employer will tax a larger pool of wages for medicare and social security. Thus, SSC and medicare wages would be overstated via the non-payroll deduction method when compared to running your own account on an after tax basis.

you can claim a credit for the medicare excess on the federal return... but social security is an extra form that can't be done with the 1040.

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Re: Open personal HSA or use company HSA?

Post by nolesrule » Tue Feb 12, 2019 9:25 pm

tmcc wrote:
Tue Feb 12, 2019 8:52 pm
FiveK wrote:
Tue Feb 12, 2019 8:48 pm
tmcc wrote:
Tue Feb 12, 2019 8:32 pm
Not to hijack the conversation but I had a thought ....

So in theory, you could be enrolled in the employer HDHP but not contribute to the HSA through the employer plan.

Then, separately, you could contribute after tax to your own account and still reap all of the federal tax benefits, correct?
All except (assuming you see this as a benefit) avoiding FICA tax on the HSA contribution amount.
Would SSC wages and medicare wages be overstated?
Assuming that SSC means Social Security, "no". Why would they be?
HSA contributions as a payroll deduction are exclusions from Medicare and social security taxes. If you contribute after tax, your employer will tax a larger pool of wages for medicare and social security. Thus, SSC and medicare wages would be overstated via the non-payroll deduction method when compared to running your own account on an after tax basis.

you can claim a credit for the medicare excess on the federal return... but social security is an extra form that can't be done with the 1040.
After tax contributions to an HSA do not overstate your SS and Medicare taxable income. You cannot claim a credit for return of overpaid SS and Medicare taxes because you did not overpay. SS and Medicare taxes are wage-based, not income based.

Think about it this way. With payroll deduction, you voluntarily take a pay cut in exchange for your employer contributing to your HSA (as technically all HSA payroll deduction contributions are employer contributions). It works the same way with employer medical/dental/vision insurance and certain other payroll deductions such as commuter benefits and FSAs that also reduce your SS/Medicare taxable income.

But if you make an after-tax contribution outside of payroll deductions, you can take some form of adjustment to your gross income on your income taxes (for some of them, as some of those benefits are only available through an employer).

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Re: Open personal HSA or use company HSA?

Post by LadyGeek » Tue Feb 12, 2019 10:04 pm

This thread is now in the Personal Finance (Not Investing) forum (HSA).
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Re: Open personal HSA or use company HSA?

Post by Darth Xanadu » Tue Feb 12, 2019 10:55 pm

But if your wages exceed the Social Security cap, then you don't really lose out on that benefit by participating in an HSA outside of your employer, right?
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Re: Open personal HSA or use company HSA?

Post by spacecadet610 » Wed Feb 13, 2019 1:30 am

Darth Xanadu wrote:
Tue Feb 12, 2019 10:55 pm
But if your wages exceed the Social Security cap, then you don't really lose out on that benefit by participating in an HSA outside of your employer, right?
You would still lose out on saving the medicare taxes.

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Re: Open personal HSA or use company HSA?

Post by nolesrule » Wed Feb 13, 2019 8:36 am

spacecadet610 wrote:
Wed Feb 13, 2019 1:30 am
Darth Xanadu wrote:
Tue Feb 12, 2019 10:55 pm
But if your wages exceed the Social Security cap, then you don't really lose out on that benefit by participating in an HSA outside of your employer, right?
You would still lose out on saving the medicare taxes.
And depending your wages (or combined wages if married), you could also end up paying the Additional Medicare Tax. So that's 1.45% to 2.35%. For a married couple maxing out their HSA, that's $101.50 to $164.50 (half that for single).

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Re: Open personal HSA or use company HSA?

Post by SevenBridgesRoad » Wed Feb 13, 2019 10:05 am

drk wrote:
Tue Feb 12, 2019 7:41 pm
pgold wrote:
Tue Feb 12, 2019 7:38 pm
Thanks for all the response. I've decided to open a Lively HSA account and move all my funds in there. I'll keep contributing through my employer to get all the tax benefits and just transfer it to Lively every now and then. Thank you!
Wait! I’d encourage you to check out Fidelity’s HSA, which is fee-free and offers access to Fidelity’s line-up of funds rather thatn TDA’s.
To be fair, Lively no longer charges a fee and you can buy Vanguard funds with no commission at TD. Nice option if you want to keep things as Vanguard as possible.
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Re: Open personal HSA or use company HSA?

Post by LawyersGunsAndMoney » Wed Feb 13, 2019 10:37 am

I just opened a Fidelity HSA and initiated a Trustee-to-trustee transfer from my active BenefitWallet HSA where pre-tax contributions go.

My plan is to transfer funds 1-2x per year.

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Re: Open personal HSA or use company HSA?

Post by tj » Wed Feb 13, 2019 5:31 pm

SevenBridgesRoad wrote:
Wed Feb 13, 2019 10:05 am
drk wrote:
Tue Feb 12, 2019 7:41 pm
pgold wrote:
Tue Feb 12, 2019 7:38 pm
Thanks for all the response. I've decided to open a Lively HSA account and move all my funds in there. I'll keep contributing through my employer to get all the tax benefits and just transfer it to Lively every now and then. Thank you!
Wait! I’d encourage you to check out Fidelity’s HSA, which is fee-free and offers access to Fidelity’s line-up of funds rather thatn TDA’s.
To be fair, Lively no longer charges a fee and you can buy Vanguard funds with no commission at TD. Nice option if you want to keep things as Vanguard as possible.

When did Vanguard funds become commission free at TD?

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Re: Open personal HSA or use company HSA?

Post by PeterParker » Wed Feb 13, 2019 5:51 pm

Wow this is confusing.

I didn't realize that if your income was between about $67,000 and $130,000 --- or something like that --- the savings on Social Security taxes are "about break-even" since you get less SS benefit in your retirement years.

The primary difference being that -- well you would get that SS discount immediately vs in the future.

But what about the 1.3% Medicare tax? That's pure profit in dodging that, with the HSA payroll deduction, right?

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Re: Open personal HSA or use company HSA?

Post by FiveK » Wed Feb 13, 2019 5:56 pm

PeterParker wrote:
Wed Feb 13, 2019 5:51 pm
But what about the 1.3% Medicare tax? That's pure profit in dodging that, with the HSA payroll deduction, right?
Right.

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Re: Open personal HSA or use company HSA?

Post by PeterParker » Wed Feb 13, 2019 9:55 pm

Okay I think I finally am starting to understand the pros and cons of payroll deduction vs. post-tax contribution.

The wiki article is a bit confusing. The calculations need to be spelled out better.

When it says every $420 of payroll deduction is $1 of your AIME or (Average Monthly Income) - that's a bit misleading and oversimplified. But it means $420/ 35 (years) / 12 (months) == $1.

It's a bit confusing because you need to think of AIME as both your expected yearly average and a 35-year-set both, not separately. In theory if you plan to make $100k for 35+ years, you should NOT figure your young years as 90% first bend years (although conceivably you could).

My point is, let's say you could see the future and that you'll actually be working 40 years. Well I guess you can't predict your highest earning years but yeah any FICA taxes you avoid for 5 of those years, depending on the spread between your highest/lowest earning years and which of them you take the FICA discount ... well there's a lot of unknowns but conceivably it can be pure profit. You avoid the FICA with no hit. Even if you average $68-70k a year or just after the 1st bend.

That said, very roughly, it's probably too even to think about too much.

Social security might crater by 2045 when I'm estimated to maybe take them, so there's that.

Also at the current model, the 'break-even' point for every dollar of FICA saved now is 18+ years after you begin taking benefits. I'm already slated to start at 67, so can I say right now I'll live to 85 as a man? Doubtful. If I croak before 85, I profit by avoiding as much FICA as possible.

The pros of forgoing payroll deductions: You can basically put everything into a Fidelity HSA immediately, no annual rollovers, forms, trustee to trustee, multiple employer custodians to deal with, tax forms, etc. The mental energy required to do all that hoopla may not be worth the small financial benefits of avoiding FICA.

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Re: Open personal HSA or use company HSA?

Post by tj » Thu Feb 14, 2019 5:25 pm

The pros of forgoing payroll deductions: You can basically put everything into a Fidelity HSA immediately, no annual rollovers, forms, trustee to trustee, multiple employer custodians to deal with, tax forms, etc. The mental energy required to do all that hoopla may not be worth the small financial benefits of avoiding FICA.
I have my payroll deducted contributions going into Fidelity.

Whether that's advantageous or not (vs. paying the extra FICA taxes), who knows.

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Re: Open personal HSA or use company HSA?

Post by emlowe » Thu Feb 14, 2019 5:32 pm

I will say this - my employer provider is HealthEquity - they are annoyingly slow at processing trustee-2-trustee.

After they receive your FAXed request, they take 1-week just more or less doing nothing (ostensibly waiting for any outstanding transactions to clear). They won't tell you anything, so you have no idea if they got your FAX or if it fell on the floor unless you call and ask them. Then they cut a paper check and mail it via USPS.

So it takes about 2 weeks to show up at Fidelity.

I think it's purposely designed to irritate you.

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Re: Open personal HSA or use company HSA?

Post by SevenBridgesRoad » Thu Feb 14, 2019 5:36 pm

tj wrote:
Wed Feb 13, 2019 5:31 pm
SevenBridgesRoad wrote:
Wed Feb 13, 2019 10:05 am
drk wrote:
Tue Feb 12, 2019 7:41 pm
pgold wrote:
Tue Feb 12, 2019 7:38 pm
Thanks for all the response. I've decided to open a Lively HSA account and move all my funds in there. I'll keep contributing through my employer to get all the tax benefits and just transfer it to Lively every now and then. Thank you!
Wait! I’d encourage you to check out Fidelity’s HSA, which is fee-free and offers access to Fidelity’s line-up of funds rather thatn TDA’s.
To be fair, Lively no longer charges a fee and you can buy Vanguard funds with no commission at TD. Nice option if you want to keep things as Vanguard as possible.

When did Vanguard funds become commission free at TD?
I can’t answer your question. I don’t know when.
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tj
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Re: Open personal HSA or use company HSA?

Post by tj » Thu Feb 14, 2019 5:40 pm

SevenBridgesRoad wrote:
Thu Feb 14, 2019 5:36 pm
tj wrote:
Wed Feb 13, 2019 5:31 pm
SevenBridgesRoad wrote:
Wed Feb 13, 2019 10:05 am
drk wrote:
Tue Feb 12, 2019 7:41 pm
pgold wrote:
Tue Feb 12, 2019 7:38 pm
Thanks for all the response. I've decided to open a Lively HSA account and move all my funds in there. I'll keep contributing through my employer to get all the tax benefits and just transfer it to Lively every now and then. Thank you!
Wait! I’d encourage you to check out Fidelity’s HSA, which is fee-free and offers access to Fidelity’s line-up of funds rather thatn TDA’s.
To be fair, Lively no longer charges a fee and you can buy Vanguard funds with no commission at TD. Nice option if you want to keep things as Vanguard as possible.

When did Vanguard funds become commission free at TD?
I can’t answer your question. I don’t know when.
Mutual funds or ETF's ?

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Re: Open personal HSA or use company HSA?

Post by Kennedy » Thu Feb 14, 2019 5:43 pm

RickBoglehead wrote:
Mon Feb 11, 2019 7:08 pm
InMyDreams wrote:
Mon Feb 11, 2019 7:04 pm
RickBoglehead wrote:
Mon Feb 11, 2019 6:53 pm
Only if you want to pay with after-tax dollars... Company HSA is pre tax .
Perhaps you mean pre-FICA dollars? Contributions made thru payroll deduction are both pre-FICA and pre-income tax.

Contributions made by an individual to an HSA are only pre-income tax.
Correct.
pgold wrote:
Mon Feb 11, 2019 7:07 pm
RickBoglehead wrote:
Mon Feb 11, 2019 6:53 pm
Only if you want to pay with after-tax dollars... Company HSA is pre FICA tax .
I'm reading posts about HSA and people sometimes talk about choosing where to open HSA (e.g. Elements, Lively, etc). Or am I not understanding it correctly?
If company does not provide. Otherwise, losing that FICA discount is crazy.
That is true unless one has 1099 income in addition to the W-2 income. If that is the case, why not open your own HSA and not pay income tax on that amount. If you allowed your W-2 employer to make payroll deductions, that will increase the amount of both-sides of FICA you will pay on your 1099 income. In other words, if you reduce your W-2 income, you also reduce the amount of FICA (employer's half) your employer will be required to pay on your behalf and increase the amount of FICA you will pay for the 1099 income (both halves paid by independent contractor). This is true because the amount of FICA owed is capped...better to half more of this amount paid by your employer (W-2 income) than by you via your 1099 income.

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SevenBridgesRoad
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Re: Open personal HSA or use company HSA?

Post by SevenBridgesRoad » Thu Feb 14, 2019 5:49 pm

tj wrote:
Thu Feb 14, 2019 5:40 pm
SevenBridgesRoad wrote:
Thu Feb 14, 2019 5:36 pm
tj wrote:
Wed Feb 13, 2019 5:31 pm
SevenBridgesRoad wrote:
Wed Feb 13, 2019 10:05 am
drk wrote:
Tue Feb 12, 2019 7:41 pm


Wait! I’d encourage you to check out Fidelity’s HSA, which is fee-free and offers access to Fidelity’s line-up of funds rather thatn TDA’s.
To be fair, Lively no longer charges a fee and you can buy Vanguard funds with no commission at TD. Nice option if you want to keep things as Vanguard as possible.

When did Vanguard funds become commission free at TD?
I can’t answer your question. I don’t know when.
Mutual funds or ETF's ?
I didn’t look into their overall commission regime, I just knew I was purchasing VTINX (VG Target Retirement Income Fund) to stay consistent with my Vanguard portfolio. Was pleasantly surprised to see no commission. So, I should amend my previous statement to say Lively no longer charges a fee and I bought VTINX twice with no commissions at TD. Anything beyond that, I don’t know what they charge.
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SevenBridgesRoad
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Re: Open personal HSA or use company HSA?

Post by SevenBridgesRoad » Thu Feb 14, 2019 7:24 pm

Reporting back. I want to be accurate re no commission at TD for two VTINX purchases in my Lively HSA.

Amending again: Lively is zero monthly fee, true. VTINX purchases appear to cost $25 each.

Upon placing the order and later looking at the transaction statement, commission is zero in both places. I didn't give it a second glance. With the questions raised in this thread, I went back and reviewed. Yes, the Commission is listed as $0. But previously I didn't notice that $25 has been tacked on to the Net Amount. Looks like a fee. One transaction was for $17,000 and the other $12,000. Both for VTINX. "Net Amount" $17,025 and $12,025 respectively. Not a concern for me, as I was expecting a commission charge. I'll give them a call in the next few days and ask.

Thanks for questioning my initial post. More to come...
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SevenBridgesRoad
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Re: Open personal HSA or use company HSA?

Post by SevenBridgesRoad » Fri Feb 15, 2019 12:56 am

Followup. Pretty straight forward. I just missed it because it didn’t really matter to me. But I should have paid more attention. TD charges a set fee of $25 for transactions involving no-load funds. So my $12000 transaction and my $17000 transaction, same $25 fee tacked on to each. Sorry for the confusion but glad to set the record straight.
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