Extra HSA contribution? Two HSA accounts?

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Topic Author
getthatmarshmallow
Posts: 419
Joined: Mon Dec 04, 2017 9:43 am

Extra HSA contribution? Two HSA accounts?

Post by getthatmarshmallow » Mon Dec 02, 2019 10:42 am

I've a probably silly question or two. I have an HSA through work. My employer contributes to my HSA every pay period, and I contribute some, too. The account is with HealthEquity. We are using the HSA to pay health expenses (thankfully not much), and HealthEquity is integrated with my health plan and local hospital/doc network so for ease of use I want to keep this account.

We are not maxing out this account (yet) as I have stupid amounts of tax advantaged space and a modest salary. But this year we're ahead of our savings goals and I'm looking for somewhere to park the extra cash, but without changing my withholding (only because it's a pain in the butt and takes two weeks to kick in...)

I'm not a huge fan of HealthEquities fees, and I'd rather open an HSA elsewhere (Vanguard, Fido, e.g.)

1) Can I have two HSA accounts? One for employer contributions/ease of use, one for investing? Obviously maximums apply.
2) If I make post-tax contributions to the HSA now, come tax time, do the contributions reduce my tax burden? (e.g., like a traditional IRA contribution?)

What I've read online suggests the answer are yes, and yes, but I figured I'd bounce the question off the collective wisdom of y'all. Any unknown unknowns that I'm missing?

Spirit Rider
Posts: 11890
Joined: Fri Mar 02, 2007 2:39 pm

Re: Extra HSA contribution? Two HSA accounts?

Post by Spirit Rider » Mon Dec 02, 2019 10:53 am

Yes, yes and Fidelity is your best option.

You should be prioritizing your HSA contributions by payroll deduction after optaining the maximum employer match. Not the other way around.

You can do fee-free indirect rollover from your employer based HSA account once per twelve (12) month period.

Topic Author
getthatmarshmallow
Posts: 419
Joined: Mon Dec 04, 2017 9:43 am

Re: Extra HSA contribution? Two HSA accounts?

Post by getthatmarshmallow » Mon Dec 02, 2019 10:58 am

Spirit Rider wrote:
Mon Dec 02, 2019 10:53 am
Yes, yes and Fidelity is your best option.

You should be prioritizing your HSA contributions by payroll deduction after optaining the maximum employer match. Not the other way around.

You can do fee-free indirect rollover from your employer based HSA account once per twelve (12) month period.
I have access to a 457b and a 403b in addition to the HSA, which I've only had for the last year. 457b, which I'm maxing, has had better fees/choices, hence the deviation from the approved investment order.

But thanks! Why the love for Fido specifically?

snailderby
Posts: 453
Joined: Thu Jul 26, 2018 11:30 am

Re: Extra HSA contribution? Two HSA accounts?

Post by snailderby » Mon Dec 02, 2019 11:07 am

1. Fidelity has no fees for its HSA, no minimum that you must hold in the HSA in cash, and a wide variety of investment options.

2. As far as whether to contribute to your employer-sponsored HSA through payroll deductions or contribute directly to an HSA on your own:
If the employee makes contributions via a Section 125 salary reduction arrangement, those contributions are also considered employer contributions, which means they're not subject to income tax or payroll tax ....
But what if you buy your HDHP coverage on your own? Or choose to use a bank or brokerage account other than the one your employer uses as an HSA custodian? You can send money to your HSA yourself, rather than using your employer's salary reduction plan (and this is your only option if your employer doesn't offer a means of contributing to an HSA via the payroll system).

You won't have to pay income tax on that money, but you'll still pay Medicare and Social Security taxes on it, and in most cases, unemployment insurance tax.
However:
Keep in mind that although avoiding payroll taxes sounds like a win, the current benefit may be partly or entirely offset by smaller Social Security checks once you retire, since the amount you get in Social Security benefits is based on the amount you earned that was subject to Social Security taxes during your working years.
From https://hsastore.com/learn/taxes/hsa-tax-deduction.

Also, if your annual income is over $137,700, the cap for the Social Security tax, contributions to an HSA via payroll deductions may reduce your Medicare taxes but not your Social Security taxes.
Last edited by snailderby on Mon Dec 02, 2019 12:16 pm, edited 1 time in total.

Spirit Rider
Posts: 11890
Joined: Fri Mar 02, 2007 2:39 pm

Re: Extra HSA contribution? Two HSA accounts?

Post by Spirit Rider » Mon Dec 02, 2019 11:59 am

getthatmarshmallow wrote:
Mon Dec 02, 2019 10:58 am
Spirit Rider wrote:
Mon Dec 02, 2019 10:53 am
Yes, yes and Fidelity is your best option.

You should be prioritizing your HSA contributions by payroll deduction after optaining the maximum employer match. Not the other way around.

You can do fee-free indirect rollover from your employer based HSA account once per twelve (12) month period.
I have access to a 457b and a 403b in addition to the HSA, which I've only had for the last year. 457b, which I'm maxing, has had better fees/choices, hence the deviation from the approved investment order.

But thanks! Why the love for Fido specifically?
The fees can not possibly outweigh the HSA combination of pre-tax contribution, tax-deferred earnings and almost certainly tax-free distributions. Also as I pointed out, you can move your employer HSA account balance to another HSA account fee-free once every 12 months.

Fidelity and maybe Lively have no maintenance fees and very low expense ratios.

Topic Author
getthatmarshmallow
Posts: 419
Joined: Mon Dec 04, 2017 9:43 am

Re: Extra HSA contribution? Two HSA accounts?

Post by getthatmarshmallow » Mon Dec 02, 2019 4:05 pm

Spirit Rider wrote:
Mon Dec 02, 2019 11:59 am
getthatmarshmallow wrote:
Mon Dec 02, 2019 10:58 am
Spirit Rider wrote:
Mon Dec 02, 2019 10:53 am
Yes, yes and Fidelity is your best option.

You should be prioritizing your HSA contributions by payroll deduction after optaining the maximum employer match. Not the other way around.

You can do fee-free indirect rollover from your employer based HSA account once per twelve (12) month period.
I have access to a 457b and a 403b in addition to the HSA, which I've only had for the last year. 457b, which I'm maxing, has had better fees/choices, hence the deviation from the approved investment order.

But thanks! Why the love for Fido specifically?
The fees can not possibly outweigh the HSA combination of pre-tax contribution, tax-deferred earnings and almost certainly tax-free distributions. Also as I pointed out, you can move your employer HSA account balance to another HSA account fee-free once every 12 months.

Fidelity and maybe Lively have no maintenance fees and very low expense ratios.

I appreciate the advice.

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