Avoiding employer HSA - Options

[damgo]

Hello all,

I'm setup with an Optum Bank HSA through my employer. I'm not a fan of it; partly because there are pretty inflexible investment options, but mainly because there is a $2000 cash minimum before they support investments. (Unsurprisingly, they pay no interest on this cash.) So I'm looking to move to a Fidelity HSA.

Unfortunately, Optum also charges a $20 fee every time you transfer cash out of the account to another custodian. It also seems they don't support transferring assets. I've worked it out and it's not actually worth it to pay the fee intermittently to zero out the Optum HSA as long as my paychecks are still going into it.

So my question is -- is there any downside to just zeroing out my pre-tax HSA paycheck contributions, and then depositing the max yearly amount into a Fidelity HSA each January? Will the final tax treatment be any different? That would let me avoid Optum entirely plus get my yearly contribution in an average of ~6 months earlier. Or are there any other options I should be looking at?

Thanks!

[dukeblue219]

If you contribute to an HSA through your employer, you and the employer both save SS tax on that amount (and Medicare?). If you deposit it all yourself you'll still get the main income tax deduction and all the other HSA benefits, but you will have paid the payroll tax already. Consider that when you're running your numbers.

[mrb09]

My employer does a match when I take the contributions out of my salary, and for that I have to use Optum.

I do a yearly rollover into Fidelity, there's no charge for that. I got the instructions from here: https://thefinancebuff.com/how-to-rollo ... r-fee.html

[vnatale]

I'm fairly familiar with HSA's and did payroll for the last organization for which I worked as an employee.

My understanding is that you own your own HSA account. Once it goes there it is yours. Your employer has no control over it.

Each employee set up their HSA account with whoever they chose. Then I'd send both their own payroll deduction plus the organization's contribution to that account.

[damgo]

If you contribute to an HSA through your employer, you and the employer both save SS tax on that amount (and Medicare?). If you deposit it all yourself you'll still get the main income tax deduction and all the other HSA benefits, but you will have paid the payroll tax already. Consider that when you're running your numbers.

Thanks... that would more than kill the benefits then, if there's no way to get the payroll tax deducted. Will look at the suggested rollover method.

My employer doesn't have a match, but they do have an incentive program where they pay a bit into your HSA for getting a physical etc... that's only once a year however.

[the_wiki]

Doesn’t seem like it’s worth the hassle just to have $2000 extra invested. Maybe just call it part of your bond/cash allocation and move $2000 more into stock elsewhere.

[JBTX]

As stated above my recollection is if you do it outside of your employer you will lose the payroll tax deduction which would be a deal killer for me.

You won’t be there forever. Whenever you leave the company you can roll it over to Fidelity.

[muffins14]

If you are making above the SS cutoff, then it’s just the Medicare portion of FICA that you miss out on

[invest4]

I contribute in full to my employer and make 2 transfers in a year for $50 in total for the year. A small price to pay to receive all the benefits and I am not bothered that it sits a bit until I make the transfer.

YMMV.

Best wishes.

[sailaway]

Doesn’t seem like it’s worth the hassle just to have $2000 extra invested. Maybe just call it part of your bond/cash allocation and move $2000 more into stock elsewhere.

This is what we do. But then, the employer seed and incentive money also comes once a quarter, so it would be an even bigger hassle for us. Sure, it is an extra $2k with no interest, but I also moved $7k into checking when I could have done $5k now and $2k in a few weeks.

[ryman554]

Isn't the answer an indirect hsa rollover once a year?

Use the employer to get the 1.4% Medicare tax break. Keep it in cash and use it as intended: to pay small medical bills or deductible or whatever, or invest if you must.

Once a year after you have accumulated 12 months or so of contributions, simply withdraw all $$ except what you need to keep as a minimum ($50?) to your bank and contribute to Fido or wherever you do your real HSA investments. Make sure to get the contribution coded properly.

Sure, you've got 2k or something not invested. Chump change as your income/investment level. Consider it a health emergency fund and move on.