HSA Custodians and Strategies

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gcmesa
Posts: 4
Joined: Fri Nov 22, 2019 2:17 am

HSA Custodians and Strategies

Post by gcmesa »

Hi everyone,

I'm a Fed. Gov, employee and this open season will be my first time moving to a HDHP so the wife and I will qualify for a HSA. So far, my custodian of choice is Fidelity so I can take advantage of their Zero S&P Index (FNILX).

When speaking to the Fidelity guy during my due diligence, he emphasized that even though couples max out a $7100 annually, I could have unlimited HSAs and then transfer all their funds into a single Fidelity fund. An odd comment, but we were talking about any awards, rewards, or bonuses that HSA custodians might offer to attract new customers. It got me thinking if I could harness the rewards from multiple HSAs, I could then transfer funds to Fidelity for investing.

I'm still doing my google research into these custodians, but what are your thoughts on this strategy, and what are you thoughts about custodian awards?

Thank you. -Greg
aristotelian
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Re: HSA Custodians and Strategies

Post by aristotelian »

I don't think there is any other custodian besides Fidelity that will give brokerage bonuses and not enough to make the additional fees worth it. Possibly TD/Lively? I transferred from TD to Fidelity and did at least get TD's transfer fee covered (it was later waived so in effect I got a $50 bonus). I transfer my Roth IRA to get the occasional bonus and you could do a series of partial transfers if you wanted to get fancy. Much easier to do with IRAs.
terran
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Re: HSA Custodians and Strategies

Post by terran »

I haven't seen anything about awards from an HSA custodian.

If your employer offers an HSA to which they'll direct deposit your contribution you'll likely avoid FICA taxes on those contributions. It this case it can make sense to contribute to the employer provided HSA, but I wouldn't leave it there, I'd still move it to Fidelity. Pay attention to fees.

There's usually a transfer fee for trustee-to-trustee HSA transfers, so I do an indirect transfer by withdrawing from the employer sponsored HSA just like I would for medical expenses and then contributing to Fidelity as a rollover contribution. Last I did this (March) a paper form was required to make a rollover contribution. You can make only one rollover contribution per rolling 12-month period (not per calendar year).
Topic Author
gcmesa
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Joined: Fri Nov 22, 2019 2:17 am

Re: HSA Custodians and Strategies

Post by gcmesa »

Thanks for the insight Aristotelian and Terran,

I'll be going with the United Healthcare plan and their preferred custodian is Optum Bank. When looking into their rewards, apparently they have a program that pays $3 per day when you reach a certain amount of walking/running steps each day. Pretty good, totaling $1095 annually.

What I don't know yet is if they have any stipulations preventing the transfer of those rewards to another custodian. My employer's literature is a bit vague if they are contributing to the HSA or if United Healthcare is contributing some if their premium to the HSA, but it's stating a $1500 annual contribution. As you guys noted, I also need a clear understanding of the underlying fees!

Thanks again guys! -Greg
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theRoCK
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Re: HSA Custodians and Strategies

Post by theRoCK »

I have also not heard of any custodians giving bonuses on HSAs. Also, you said this is your first time on HDHP, so presumably you dont have an existing HSA with a large balance. I dont think there are any custodians who give a bonus just for opening a HSA with them, not transferring in a large existing HSA.
gcmesa wrote: Mon Sep 14, 2020 11:32 pm When speaking to the Fidelity guy during my due diligence, he emphasized that even though couples max out a $7100 annually, I could have unlimited HSAs and then transfer all their funds into a single Fidelity fund. An odd comment, but we were talking about any awards, rewards, or bonuses that HSA custodians might offer to attract new customers. It got me thinking if I could harness the rewards from multiple HSAs, I could then transfer funds to Fidelity for investing.
I am not sure what the Fidelity rep meant and what you took away from it. Yes, you could have multiple HSAs open, but you can only contribute the limit of $7100 among all custodians combined. You cannot contribute 7100 to each account. Just making sure you didnt make any mistaken assumptions, as your wording is unclear to me.
gcmesa wrote: Tue Sep 15, 2020 10:23 am Thanks for the insight Aristotelian and Terran,

I'll be going with the United Healthcare plan and their preferred custodian is Optum Bank. When looking into their rewards, apparently they have a program that pays $3 per day when you reach a certain amount of walking/running steps each day. Pretty good, totaling $1095 annually.

What I don't know yet is if they have any stipulations preventing the transfer of those rewards to another custodian. My employer's literature is a bit vague if they are contributing to the HSA or if United Healthcare is contributing some if their premium to the HSA, but it's stating a $1500 annual contribution. As you guys noted, I also need a clear understanding of the underlying fees!

Thanks again guys! -Greg
HSA balances are your money, whoever contributed it (employer, health bonus or yourself), and you can transfer it to any custodian. Just be aware that if you do a trustee-trustee transfer, usually there is a fee involved, and Fidelity told me they will reimburse it if the transfer is over 10k. But you can always do the indirect rollover method as suggested earlier and avoid fees.

Another thing to be aware of is that the annual limit includes your employer contribution including any health related bonuses. In my previous company, they put in $1500, and a $200 bonus if I completed the annual physical and a survey. So the maximum I could contribute assuming I took advantage of the bonus is 7100-1700=5400. So be aware of whether the daily bonus program pays into your HSA, or they apply it as a credit towards your premium, or maybe pay it out to you.
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