HSA - Bank Accounts - Inactivity Can Result in Problem?

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Electron
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HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by Electron »

I'm wondering if others have had notices regarding inactive Health Savings Accounts or bank accounts of any type.

There are advantages to letting an HSA grow over time but this has already resulted in my receiving a letter from my credit union. It seems hard to believe that only one year of inactivity should be an issue unless statements could not be delivered which was not the case. I believe property is typically considered unclaimed after 3-5 years of inactivity and no contact with the owner.

Is my experience after one year typical of many banks and credit unions, or does it sound as though my credit union is the exception? I understand that an unclaimed account would eventually be turned over to the state, but warnings after only one year would seem premature.
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Sidney
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by Sidney »

What did the letter say?
I always wanted to be a procrastinator.
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Electron
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by Electron »

Sidney wrote:What did the letter say?
I received a letter that needed to be returned within 6 months to establish ownership and interest in the account. They had to meet California rules for unclaimed property and inactive accounts. It was also indicated that the account would be turned over to the state of California no later than three months after the stated deadline. After that I would need to file a claim to have the account returned to me.

I called the local credit union office and they said they would mark the account active in some way and that returning the letter was not necessary. Even so, I decided it was prudent to sign and return the letter. Maybe one needs to just make a small withdrawal every year to keep them happy.
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by kaneohe »

Perhaps you can negotiate something w/ them. My 2 CA CUs are happy (I think) to receive a telephone call periodically.....they claim every yr or 2 but somehow I got 6 mos. in my head so I continue doing that. You need a tickler system to remind you and more record keeping to keep status.
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dm200
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by dm200 »

KAWill70 wrote:I'm wondering if others have had notices regarding inactive Health Savings Accounts or bank accounts of any type.

There are advantages to letting an HSA grow over time but this has already resulted in my receiving a letter from my credit union. It seems hard to believe that only one year of inactivity should be an issue unless statements could not be delivered which was not the case. I believe property is typically considered unclaimed after 3-5 years of inactivity and no contact with the owner.

Is my experience after one year typical of many banks and credit unions, or does it sound as though my credit union is the exception? I understand that an unclaimed account would eventually be turned over to the state, but warnings after only one year would seem premature.
I don't know if there are any special rules about HSA accounts, but I do know that states are getting greedier and greedier about seizing "dormant" accounts as "abandoned" after several years. In Virginia, it is five years and interest/dividend postings do not count. In addition, banks and credit unions are under scrutiny from regulators to have special procedures dor "dormant" accounts -- perhaps after a year. So, it is fair, I think, to blame the government for this aspect.

In addition, when looking at the "bottom line" banks and credit unions often see inactive accounts as a drag on costs and doing little or noting to bring in revenue. They often charge fees after a certain period.

In many cases, just going on record (depends on state law) that the account should not be considered "dormant" or abandoned may work.

The better solution, I think, is to have some regular transaction (deposit or withdrawal), say, at least twice a year (maybe 3-4 times) and that should keep you off the "inactive", "dormant" or "abandoned" lists. So much of this is computerized these days. Just make the transactions and then you won;t have to deal with (and probably argue with) someone at the bank or credit union.
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by Sidney »

Sounds like a CA thing, not an HSA thing.
I always wanted to be a procrastinator.
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by Electron »

Thanks all for your help.

I ran across an excellent article from the Wall Street Journal that addresses this subject. It appears that states are moving away from returned mail as an indication of abandoned property and now looking at account activity.

http://online.wsj.com/article/SB1000142 ... 50090.html

I also tried a search in this forum on the word escheat and discovered that other HSA owners have had a problem similar to mine after only 12 months. Annual activity of some type seems to be the easiest solution.

This could become quite a common problem when you think about IRA Accounts that might be inactive until RMDs start. Roth IRAs might have even less activity if people wait to withdraw from them.

It appears that banks and credit unions might be the greatest concern at the moment. It's not clear that Mutual Fund companies operate in exactly the same way, and I think many buy and hold investors have inactive accounts. It could also be that any account activity across multiple fund accounts at the same firm might be all that is needed.

Brokerage accounts and stock dividend reinvestment plans could also be a concern.
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by allancoleman »

After having more than one HSA custodian in the past , I have transferred to my local federal credit union with a institute - to - institute transfer a couple of years ago without any further difficulties . :happy . Sure is a lot easier sitting directly across the counter from my local credit union to discuss my HSA account . :!:
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by statman »

We have 2 homes, primary residence and main bank account in Florida, summer home and small convenience bank account north. We almost never write a check on the convenience account -- having it allows us to cash checks from the main account etc. I have one utility bill automatically deducted from the small account each month precisely for the purpose of keeping it "active." This won't work for HSA accounts, but otherwise solves the problem.
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by rkhusky »

My bank and credit union happily start charging monthly account charges when they see a lack of activity, usually after a year.
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by Electron »

dm200 wrote: In addition, when looking at the "bottom line" banks and credit unions often see inactive accounts as a drag on costs and doing little or noting to bring in revenue. They often charge fees after a certain period.
Thanks for your comments.

In the case of a bank or credit union, just having the HSA deposit should make them happy as I assume it increases the funds that can be loaned out to other customers. Contributions may no longer be possible for some account holders, and withdrawals would not help the bottom line.

However, you are correct, as a Google Search on the words HSA Inactive turns up several instances of inactivity fees.

I did find one link that says quite a bit about the inactive account situation.

https://yourbancorphsa.mybankingservice ... _05.10.pdf

Here is a key paragraph:

"What happens if there is no activity in an employee’s Health Savings Account?"

"Inactivity begins after 13 months with no customer-initiated or direct deposit activity on the account. A $5.00 monthly inactivity fee will begin being charged on the statement period following the 13th month. When an account is inactive for 24 months, the law requires banks to status an account ‘dormant’. The account will continue to be assessed the $5.00 per month fee until we are required to escheat the money to the appropriate state (per banking regulations). If the account holder goes dormant or inactive during the month, a letter will be generated on the date of the status change and mailed to the customer."
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by tractorguy »

My credit union (in Illinois) started charging a monthly "inactivity fee" after 12 months if I didn't withdraw or deposit any money in that time. To avoid this I had to call them every year. If I was late, they would happily reverse the charges.

This was an account that had a 3 year CD tied to it. It just expired (5% interest sigh.....) so I was finally able to pull all of the money out and close the account. I had moved away from the area it served a few years ago so there was no reason to keep the account open.
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by tfb »

KAWill70 wrote:Annual activity of some type seems to be the easiest solution.

This could become quite a common problem when you think about IRA Accounts that might be inactive until RMDs start. Roth IRAs might have even less activity if people wait to withdraw from them.
It doesn't have to be transactional activity. Logging into account online will count as an activity indicating the owner still cares about the account.
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by Easy Rhino »

In theory, yes, but I'd be surprised if any bank actually counted logins as keepalive activity. Just from an IT hurdle standpoint.
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by dm200 »

tfb wrote:
KAWill70 wrote:Annual activity of some type seems to be the easiest solution.

This could become quite a common problem when you think about IRA Accounts that might be inactive until RMDs start. Roth IRAs might have even less activity if people wait to withdraw from them.
It doesn't have to be transactional activity. Logging into account online will count as an activity indicating the owner still cares about the account.
While I agree that, depending on state law, there does not need to be transactional activity, I doubt logging i counts Can you cite a reference for your statement?

Logging in and looking at an account is (it sure seems to me) the same as reading a paper statement. Reading a paper statement does NOT count.
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by tfb »

From the linked WSJ article
Also, it doesn't hurt to check your account balance annually, by phoning an automated or recorded line or logging into a password-protected online account.
Of course the bank knows which account belongs to which online id and the last log-in date.
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by Epsilon Delta »

dm200 wrote:
tfb wrote: Logging into account online will count as an activity indicating the owner still cares about the account.
While I agree that, depending on state law, there does not need to be transactional activity, I doubt logging i counts Can you cite a reference for your statement?

Logging in and looking at an account is (it sure seems to me) the same as reading a paper statement. Reading a paper statement does NOT count.
Unlike reading a mailed statement, logging in is a two way process. It seems that it would be closer to requesting a paper statement, or asking a teller for the balance. It appears, to me, that there is a logical basis for there being a difference. On the other hand most Internet analogies are tendentious so a cite would be welcome.
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by albedo »

Very interesting thread. I wasn’t aware of these account inactivity rules and the implications for long-term account holders.

I made a one-time transfer from my IRA into my HSA earlier this year, and that’s the last contribution I’ll be able to make before becoming ineligible to contribute. I guess I’ll have to go into decumulation mode to maintain account activity. I’m thinking of setting up automatic monthly payments for my Medicare premiums when I start next next year, if the credit union will allow it.

I'll be very interested to find out whether or not logging-on to check the account periodically will be considered account activity.
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by Easy Rhino »

guys, be careful on the road of trying to come up with a common sense approach to escheatment. Because it leads to madness. The primary problem is that that laws vary by state. And the states are changing them. The vast majority of these laws don't even address online activity one way or another. Some states care about returned mail, some don't. But then the other problem is that you have to worry about the bank's and brokerages IT departments, which theoretically have to craft an inactivity solution that works in all 50 states. Smaller financial institutions won't even try.

the two best ways to keep an account alive are:
1) Perform a non-autopilot monetary transaction.
2) Contact the financial institution and find out what it takes to keep your account alive.

The good news is that if a FI is getting ready to escheat your funds, they're required to contact you. So if you're reading your mail, you'll find out about it with months to spare.
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Re: HSA - Bank Accounts - Inactivity Can Result in Problem?

Post by Electron »

Easy Rhino wrote: The two best ways to keep an account alive are:
1) Perform a non-autopilot monetary transaction.
2) Contact the financial institution and find out what it takes to keep your account alive.
That sounds like excellent advice.

The inactivity fees now make more sense. The financial institutions want to avoid the effort and expense of mailings to account holders, dealing with inactive and dormant account holder lists, and especially dealing with a state government in preparation for actually transferring funds.

There is one surprising thing about my case. I had an HSA, Savings Account, and Checking Account at my Credit Union. All had been inactive for slightly over one year, yet I received a warning letter only for the HSA. The other two accounts had very small balances so maybe that was a factor.

Fortunately, as you indicated, one will be notified by mail in plenty of time to avoid problems with an account. When I called my Credit Union about this issue, I believe they said one would get several warnings and mailings before any account was actually transferred to the state.
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