Keep Money In Employer HSA or Open Separate HSA?

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MutualFun
Posts: 28
Joined: Tue Mar 17, 2015 10:33 pm

Keep Money In Employer HSA or Open Separate HSA?

Post by MutualFun »

My employer provides a high deductible health plan and allows for pretax salary deductions into an HSA that they provide. Unfortunately, it comes with a $30 dollar/year administration fee that I don't think I can get out of. If I want to invest the money, I would have to pay an additional $30/year to use Devenir.

My other option is to open a mostly fee free HSA (Fidelity probably) myself, and transfer money from my work HSA to my personal HSA to invest it there. However, while I do not see a direct transfer fee in either fee schedule, it looks like the work HSA has a clunky process requiring that I mail in a form every time I want to transfer money.

What I am wondering is whether it is better to go with just my work HSA and pay the additional $30/year, or open an external HSA and go through the manual process of filling out forms and mailing them to my employer's HSA administrator every time I want to transfer money. What are your thoughts?

I also have another HSA from a while ago that I want to directly transfer or rollover. Unfortunately, it has rollover/transfer/closing fees. To do a transfer/rollover/close the account, I need to specify how much to take out of the account. Do I put the total dollar amount in the account, the total minus the expected fees, or something else?
johan851
Posts: 169
Joined: Sun Apr 17, 2011 12:59 pm

Re: Keep Money In Employer HSA or Open Separate HSA?

Post by johan851 »

$30 per year seems like a small price to pay to avoid the hassle of constantly transferring. And you can always transfer down the road if something changes.
KATNYC
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Joined: Fri Apr 07, 2017 4:34 pm

Re: Keep Money In Employer HSA or Open Separate HSA?

Post by KATNYC »

If there is no employer incentive, I'd just open my own. I use Lively for our family HSA. There are zero fees.
My employer for 2020 finally has an HSA and they contribute $500. It's connected to Bank of America which requires a $1,000 minimum to invest.
I have no intention of using the BoA investment option and will use the $500 for planned medical expenses. This does of course reduce my Lively contribution limit by $500. Lively is connected to TD Ameritrade.
DSInvestor
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Re: Keep Money In Employer HSA or Open Separate HSA?

Post by DSInvestor »

Since you're likely to be contributing to the employer HSA regularly, I suspect that you'll be assessed the administrative fee even if you transfer money out to another HSA account.
Wiki
AznSaver
Posts: 110
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Location: Seattle, WA

Re: Keep Money In Employer HSA or Open Separate HSA?

Post by AznSaver »

MutualFun wrote: Sat Jan 04, 2020 11:33 pm ...
What I am wondering is whether it is better to go with just my work HSA and pay the additional $30/year, or open an external HSA and go through the manual process of filling out forms and mailing them to my employer's HSA administrator every time I want to transfer money. What are your thoughts?

I also have another HSA from a while ago that I want to directly transfer or rollover. Unfortunately, it has rollover/transfer/closing fees. To do a transfer/rollover/close the account, I need to specify how much to take out of the account. Do I put the total dollar amount in the account, the total minus the expected fees, or something else?

I am in a similar dilemma and chose to open an external fidelity HSA.
In my case my employer does a pay pass through of $1200 annually so I must keep their HSA provider to recieve this.
I setup my fidelity HSA and submitted the information for my payroll deducted contributions to go to this account. This saves you from payroll taxes on your contributions.

If you are not getting a passthrough you should be able to use the fidelity HSA as your primary account unless there are other restrictions.
For me the cost to transfer the funds is $25 for a partial and it's what I'll have to eat along with their new .02 monthly charge on investments until transferred out. If you don't have to pay a fee to do a partial or total transfer this an even better reason to do so.

Fidelity and the other provider should be able to help you with the transfer process... typically you would include the total account balance and they would subtract the transfer costs from it.
bogglizer
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Joined: Tue Aug 16, 2016 8:56 pm

Re: Keep Money In Employer HSA or Open Separate HSA?

Post by bogglizer »

If you make over $15 and it takes more that 2 hours per year to fill out the forms, then you are wasting your time better spent at the beach.

Also, my experience is that $30/year isn't so bad. Most HSA vendors seems to have hidden fees in excess of that.
MotoTrojan
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Re: Keep Money In Employer HSA or Open Separate HSA?

Post by MotoTrojan »

Fidelity fills out most of the forms with you, it’s pretty seamless really.

I’ve decided to transfer annually. My HSA is free unless investing, then it’s $2.50/month unless you hold $3K in cash.

Main incentive for me was additional access to more exotic ETFs.
Spirit Rider
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Re: Keep Money In Employer HSA or Open Separate HSA?

Post by Spirit Rider »

AznSaver wrote: Sun Jan 05, 2020 12:02 am I setup my fidelity HSA and submitted the information for my payroll deducted contributions to go to this account. This saves you from payroll taxes on your contributions.
Your suggestion may not be valid for you and is unlikely of value for the vast majority of forum members:
  • In order to be FICA and income tax exempt, HSA contributions must be made by Section 125 salary reduction. If it is done by direct deposit of after-tax net payroll it is not FICA and income tax exempt.
  • It is possible but rare for an employer with a Section 125 plan supporting HSA salary reductions to not have designated HSA custodian and allow the selection of where to send the HSA salary reductions.
  • Even if you are correct that your plan allows this. The vast majority of people with employer HSA salary reductions have a plan with a designated HSA custodian who can not.
aorin
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Joined: Tue Nov 20, 2012 2:11 pm

Re: Keep Money In Employer HSA or Open Separate HSA?

Post by aorin »

AznSaver wrote: Sun Jan 05, 2020 12:02 am For me the cost to transfer the funds is $25 for a partial and it's what I'll have to eat along with their new .02 monthly charge on investments until transferred out. If you don't have to pay a fee to do a partial or total transfer this an even better reason to do so.
You should be able to do a 60 day rollover once a year with zero cost. I just had my HSA transfer all but a few dollars to my checking account, and then sent a check with a deposit slip to Fidelity. Here is a good explanation of how to do this:

https://thefinancebuff.com/how-to-rollo ... r-fee.html

My employer has changed HSA providers 4 times so far...whenever I end up with a dud I have used this method.
AznSaver
Posts: 110
Joined: Sun Aug 25, 2019 5:51 pm
Location: Seattle, WA

Re: Keep Money In Employer HSA or Open Separate HSA?

Post by AznSaver »

Spirit Rider wrote: Sun Jan 05, 2020 3:33 am Your suggestion may not be valid for you and is unlikely of value for the vast majority of forum members:
  • In order to be FICA and income tax exempt, HSA contributions must be made by Section 125 salary reduction. If it is done by direct deposit of after-tax net payroll it is not FICA and income tax exempt.
  • It is possible but rare for an employer with a Section 125 plan supporting HSA salary reductions to not have designated HSA custodian and allow the selection of where to send the HSA salary reductions.
  • Even if you are correct that your plan allows this. The vast majority of people with employer HSA salary reductions have a plan with a designated HSA custodian who can not.
Thank you for the information, just to clarify are you saying that pretax contributions are still subject to payroll taxes?
I understand that post tax/direct deposit contributions would be subject to this.

I am a federal employee and our agency self-service HR allows for pretax-HSA payroll deductions.
At the same time I cannot direct where my employer-passthrough is sent; however I can select where my volunteer contributions are deposited.
I didn't regard this as a unique benefit and thought that others could be likely to have the same ability.
Topic Author
MutualFun
Posts: 28
Joined: Tue Mar 17, 2015 10:33 pm

Re: Keep Money In Employer HSA or Open Separate HSA?

Post by MutualFun »

DSInvestor wrote: Sat Jan 04, 2020 11:59 pm Since you're likely to be contributing to the employer HSA regularly, I suspect that you'll be assessed the administrative fee even if you transfer money out to another HSA account.
Yeah there's a base admin fee of $30 and if I want to invest, there is an additional $30 fee for a total of $60/year. And that's before expense ratios.
Seal the Deal
Posts: 113
Joined: Sat Jan 20, 2018 7:25 pm

Re: Keep Money In Employer HSA or Open Separate HSA?

Post by Seal the Deal »

aorin wrote: Sun Jan 05, 2020 7:12 am
AznSaver wrote: Sun Jan 05, 2020 12:02 am For me the cost to transfer the funds is $25 for a partial and it's what I'll have to eat along with their new .02 monthly charge on investments until transferred out. If you don't have to pay a fee to do a partial or total transfer this an even better reason to do so.
You should be able to do a 60 day rollover once a year with zero cost. I just had my HSA transfer all but a few dollars to my checking account, and then sent a check with a deposit slip to Fidelity. Here is a good explanation of how to do this:

https://thefinancebuff.com/how-to-rollo ... r-fee.html

My employer has changed HSA providers 4 times so far...whenever I end up with a dud I have used this method.
This. The IRS allows one 60 day rollover per year. (1) request the money from your HSA as you normally would for a medical expense. (2) Mail your new HSA a check for that amount and a deposit form indicating it is a 60 day rollover. Simple, no fees.
Spirit Rider
Posts: 13625
Joined: Fri Mar 02, 2007 2:39 pm

Re: Keep Money In Employer HSA or Open Separate HSA?

Post by Spirit Rider »

AznSaver wrote: Sun Jan 05, 2020 11:26 am
Spirit Rider wrote: Sun Jan 05, 2020 3:33 am Your suggestion may not be valid for you and is unlikely of value for the vast majority of forum members:
  • In order to be FICA and income tax exempt, HSA contributions must be made by Section 125 salary reduction. If it is done by direct deposit of after-tax net payroll it is not FICA and income tax exempt.
  • It is possible but rare for an employer with a Section 125 plan supporting HSA salary reductions to not have designated HSA custodian and allow the selection of where to send the HSA salary reductions.
  • Even if you are correct that your plan allows this. The vast majority of people with employer HSA salary reductions have a plan with a designated HSA custodian who can not.
Thank you for the information, just to clarify are you saying that pretax contributions are still subject to payroll taxes?
I understand that post tax/direct deposit contributions would be subject to this.
No, what I am saying is that you need to distinguish between pre-tax HSA contributions by Section 125 plan salary reductions and after-tax direct deposit of net pay. My point was that while possible, it is rare for employers to not have a designated HSA custodian and allow the employee to select their own HSA custodian for Section 125 contributions.
I am a federal employee and our agency self-service HR allows for pretax-HSA payroll deductions. At the same time I cannot direct where my employer-pass through is sent; however I can select where my volunteer contributions are deposited.I didn't regard this as a unique benefit and thought that others could be likely to have the same ability.
Any employee can select an ACH routing number and account number to direct deposit a portion of their after-tax net pay. However, only HSA contributions by Section 125 salary reduction are FICA and income tax exempt. You need to be sure that your selection of the Fidelity HSA contributions were by Section 125 salary reduction and not just direct deposit of net pay. The latter is after-tax and must be reported and deducted on your tax return and will not be FICA tax exempt.

While it is possible and I have no way of knowing what your agency Section 125 plan allows. I have never heard of a Section 125 plan that directs the employer contributions to a designated HSA custodian and allows the employee to direct their HSA salary reductions to a different HSA custodian.
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