Opening a new HSA

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Topic Author
lexor
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Opening a new HSA

Post by lexor » Mon Jan 06, 2020 12:32 pm

I'm planning to open a second HSA and keep most of my balance there because my company forces me to keep at least $1000 in cash at HealthEquity HSA.

First of all, am I correct I can do this (because I'm expecting some push back from HealthEquity)?

Second, are there any hidden fees to a Fidelity HSA or can I literally open a fee free HSA and invest in 0 expense ratio broad market funds?
Last edited by lexor on Mon Jan 06, 2020 12:38 pm, edited 1 time in total.

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RickBoglehead
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Re: Opening a new HSA

Post by RickBoglehead » Mon Jan 06, 2020 12:38 pm

lexor wrote:
Mon Jan 06, 2020 12:32 pm
I'm planning to open a second HSA and keep most of my balance there because my company forces me to keep at least $1000 in cash at HealthEquity HSA. First of all, I'm correct that I can do this, right (because I'm expecting some push back from HealthEquity)?

Second, are there any hidden fees to a Fidelity HSA or can I literally open a fee free HSA and invest in 0 expense ratio broad market funds?
Yes and free.
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annu
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Re: Opening a new HSA

Post by annu » Mon Jan 06, 2020 7:15 pm

I am also doing after tax hsa, can deduct what I pay as standard deduction for state and fed tax, but not payroll tax I have paid.

So you will lose some money if you go this route....

livesoft
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Re: Opening a new HSA

Post by livesoft » Mon Jan 06, 2020 7:20 pm

annu wrote:
Mon Jan 06, 2020 7:15 pm
I am also doing after tax hsa, can deduct what I pay as standard deduction for state and fed tax, but not payroll tax I have paid.

So you will lose some money if you go this route....
Your language seems imprecise about taxes. At least I'm confused with your usage of the term "standard deduction." HSA contributions are excluded from income above the AGI line and not deducted below the line. The OP is not necessarily contributing to a different HSA, but letting employer deduct contributions from their paycheck and occasionally doing a custodian-to-custodian rollover into the different HSA which should not cause them to lose money unless there is a charge for a rollover. I think.
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Topic Author
lexor
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Re: Opening a new HSA

Post by lexor » Mon Jan 06, 2020 7:22 pm

annu wrote:
Mon Jan 06, 2020 7:15 pm
I am also doing after tax hsa, can deduct what I pay as standard deduction for state and fed tax, but not payroll tax I have paid.

So you will lose some money if you go this route....
I don't think payroll deduction is an option for me (will check), but if it is I'd try to use payroll deduction and then move the money over to Fidelity.

Topic Author
lexor
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Re: Opening a new HSA

Post by lexor » Mon Jan 06, 2020 7:31 pm

livesoft wrote:
Mon Jan 06, 2020 7:20 pm
annu wrote:
Mon Jan 06, 2020 7:15 pm
I am also doing after tax hsa, can deduct what I pay as standard deduction for state and fed tax, but not payroll tax I have paid.

So you will lose some money if you go this route....
Your language seems imprecise about taxes. At least I'm confused with your usage of the term "standard deduction." HSA contributions are excluded from income above the AGI line and not deducted below the line. The OP is not necessarily contributing to a different HSA, but letting employer deduct contributions from their paycheck and occasionally doing a custodian-to-custodian rollover into the different HSA which should not cause them to lose money unless there is a charge for a rollover. I think.

Regarding the custodian to custodian roll over, is there some way I can explain to healthy equity that it's allowed and I'm allowed to take the balance below $1000? Previously they told me I couldn't even have a second HSA (ironically I have 3 at the moment lol).

livesoft
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Re: Opening a new HSA

Post by livesoft » Mon Jan 06, 2020 7:40 pm

lexor wrote:
Mon Jan 06, 2020 7:31 pm
Regarding the custodian to custodian roll over, is there some way I can explain to healthy equity that it's allowed and I'm allowed to take the balance below $1000? Previously they told me I couldn't even have a second HSA (ironically I have 3 at the moment lol).
I don't know. I can write that HSA Savings bank has a place to click to rollover/transfer the assets of one's other HSA into the HSA Savings bank, so at least they know that such things can happen. Perhaps your HSA custodian has something similar. The danger is that if you request a custodian-to-custodian rollover that they send the entire account value over to the new custodian. One can also just write a check and deposit the check in your new HSA. But that can only happen once a year I think.

Did you read the IRS Publication on HSAs? https://www.irs.gov/pub/irs-pdf/p969.pdf I won't quote the relevant paragraph on Rollovers, but it is very very short and direct.
Last edited by livesoft on Mon Jan 06, 2020 7:43 pm, edited 1 time in total.
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classicindexer
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Re: Opening a new HSA

Post by classicindexer » Mon Jan 06, 2020 7:43 pm

Custodian to custodian transfers (partial or entire account) between HealthEquity and Fidelity HSAs are sent via paper forms/paper check and will take a few weeks to complete. We decided to forego payroll deduction payroll tax benefits and contribute out of pocket directly to a Fidelity HSA because I did not want to pay HealthEquity's self directed investment fees.

masrepus
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Re: Opening a new HSA

Post by masrepus » Mon Jan 06, 2020 11:36 pm

I just went through the same scenario - Health Equity HSA through job, hate the fees for investing, so moved most of the money to Fidelity HSA.

The Fidelity HSA is totally free. Health Equity has an online form you can fill out for transfers from them to Fidelity. I used the Partial Transfer form and it indicates I just need to leave $25.00 in the account to keep it active. Process took just over two weeks. You have to have cash in the account. It is all paper, they cut a check, send to Fidelity and eventually deposited. I received an account will be closed email when the check was cut, so I opened a case and the rep said that was automatic but not to worry. Account is still active. There was no fee for the transfer and no limit to number of partial transfers, though I haven't done another yet. Two others at work have done the same.

I also wanted to just drop Health Equity and contribute only to the Fidelity HSA. Is the comment above accurate that you would lose out since the pre-tax wouldn't happen? I was thinking it would even out at tax filing, where you would deduct the contributions from income, so it didn't matter. Is that wrong?

Topic Author
lexor
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Re: Opening a new HSA

Post by lexor » Tue Jan 07, 2020 12:19 am

masrepus wrote:
Mon Jan 06, 2020 11:36 pm
I just went through the same scenario - Health Equity HSA through job, hate the fees for investing, so moved most of the money to Fidelity HSA.

The Fidelity HSA is totally free. Health Equity has an online form you can fill out for transfers from them to Fidelity. I used the Partial Transfer form and it indicates I just need to leave $25.00 in the account to keep it active. Process took just over two weeks. You have to have cash in the account. It is all paper, they cut a check, send to Fidelity and eventually deposited. I received an account will be closed email when the check was cut, so I opened a case and the rep said that was automatic but not to worry. Account is still active. There was no fee for the transfer and no limit to number of partial transfers, though I haven't done another yet. Two others at work have done the same.

I also wanted to just drop Health Equity and contribute only to the Fidelity HSA. Is the comment above accurate that you would lose out since the pre-tax wouldn't happen? I was thinking it would even out at tax filing, where you would deduct the contributions from income, so it didn't matter. Is that wrong?
Reading more about it my understanding is the same as yours and we can contribute straight to Fidelity.

However, I suppose there is some disadvantage in the tax deduction route because you'd get the tax break much later. 10 months later on average? So you'd miss out on roughly 3500*.25*.07*(10/12) or ~$51/year (With 25% tax. Check my math)

"contributions are tax-deductible, or if made through a payroll deduction, they are pretax." https://money.usnews.com/money/personal ... s-accounts

masrepus
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Re: Opening a new HSA

Post by masrepus » Tue Jan 07, 2020 2:58 pm

lexor wrote:
Tue Jan 07, 2020 12:19 am
Reading more about it my understanding is the same as yours and we can contribute straight to Fidelity.

However, I suppose there is some disadvantage in the tax deduction route because you'd get the tax break much later. 10 months later on average? So you'd miss out on roughly 3500*.25*.07*(10/12) or ~$51/year (With 25% tax. Check my math)

"contributions are tax-deductible, or if made through a payroll deduction, they are pretax." https://money.usnews.com/money/personal ... s-accounts
Good point on losing the deduction until tax time. Small loss, but a loss. I need to see how it compares to the fees Health Equity charges for the brokerage or to the really low interest on cash.

I didn't understand the math calculation - 3500*.25 makes sense, but what is the .07 in the (10/12)? Is that how you are calculating the missed deduction over the course of the year since it is per paycheck and not a single up front 3500 at the beginning of the year?

Topic Author
lexor
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Re: Opening a new HSA

Post by lexor » Tue Jan 07, 2020 5:31 pm

masrepus wrote:
Tue Jan 07, 2020 2:58 pm
lexor wrote:
Tue Jan 07, 2020 12:19 am
Reading more about it my understanding is the same as yours and we can contribute straight to Fidelity.

However, I suppose there is some disadvantage in the tax deduction route because you'd get the tax break much later. 10 months later on average? So you'd miss out on roughly 3500*.25*.07*(10/12) or ~$51/year (With 25% tax. Check my math)

"contributions are tax-deductible, or if made through a payroll deduction, they are pretax." https://money.usnews.com/money/personal ... s-accounts
Good point on losing the deduction until tax time. Small loss, but a loss. I need to see how it compares to the fees Health Equity charges for the brokerage or to the really low interest on cash.

I didn't understand the math calculation - 3500*.25 makes sense, but what is the .07 in the (10/12)? Is that how you are calculating the missed deduction over the course of the year since it is per paycheck and not a single up front 3500 at the beginning of the year?
Yes, opportunity cost of the deduction

.07 assumed 7% yearly interest if invested in the market
(10 months / 12 months) is average amount of time you missed out on investing since you missed 6 months average plus the 4 months until tax time the following year

Student2
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Re: Opening a new HSA

Post by Student2 » Tue Jan 07, 2020 7:00 pm

As long as you are enrolled in a high-deductible health plan, you can deduct contributions to an HSA, outside of your employer plan, for both federal and (in most states) state taxes. I think what you miss out on by not using payroll deductions to fund your HSA are the FICA exemptions. For this reason, I use payroll deductions then roll over my HSA once per year, as permitted, to my preferred HSA custodian, https://livelyme.com/. My employer's chosen HSA custodian, BenefitWallet, isn't bad, but there are no fees associated with investing at Lively. This way I get money into my HSA with a little more effort, but triple-tax free.

One thing to be aware of is that there is often a charge for trustee-to-trustee transfers, which are allowed as many times per year as you wish. Rollovers are free, but are permitted only once per year.

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telemark
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Re: Opening a new HSA

Post by telemark » Tue Jan 07, 2020 9:03 pm

lexor wrote:
Tue Jan 07, 2020 12:19 am
However, I suppose there is some disadvantage in the tax deduction route because you'd get the tax break much later. 10 months later on average? So you'd miss out on roughly 3500*.25*.07*(10/12) or ~$51/year (With 25% tax. Check my math)

"contributions are tax-deductible, or if made through a payroll deduction, they are pretax." https://money.usnews.com/money/personal ... s-accounts
I'm not sure what the cited article is trying to say there. Contributions to an HSA are taken out "before the line" and always reduce your AGI dollar for dollar. See the wiki at https://www.bogleheads.org/wiki/Health_ ... iderations. Doing it as a payroll deduction may reduce your Social Security and Medicare taxes, which raises the possibility that it might cut into your benefits as well. Anyone know?

If you are worried about having too much tax withheld you can always file with your employer to have it reduced.

livesoft
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Re: Opening a new HSA

Post by livesoft » Tue Jan 07, 2020 10:16 pm

Payroll deduction saves you 7.65% extra over contributing via your paycheck. I didn't look at any of the math here because Yes, the savings on not paying income taxes is the same. But the FICA/medicare tax savings is NOT the same. 7.65% is a big deal to me.

However, if you already pay the maximum SS tax because of your salary, then it would only be a 1.45% difference.
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annu
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Re: Opening a new HSA

Post by annu » Tue Jan 07, 2020 11:02 pm

livesoft wrote:
Mon Jan 06, 2020 7:20 pm
annu wrote:
Mon Jan 06, 2020 7:15 pm
I am also doing after tax hsa, can deduct what I pay as standard deduction for state and fed tax, but not payroll tax I have paid.

So you will lose some money if you go this route....
Your language seems imprecise about taxes. At least I'm confused with your usage of the term "standard deduction." HSA contributions are excluded from income above the AGI line and not deducted below the line. The OP is not necessarily contributing to a different HSA, but letting employer deduct contributions from their paycheck and occasionally doing a custodian-to-custodian rollover into the different HSA which should not cause them to lose money unless there is a charge for a rollover. I think.
I am sorry, my thoughts some times do not translate into texts or for that matter any other for of communication for that matter :-)
I was referring to this https://hsastore.com/learn/taxes/hsa-tax-deduction

carmonkie
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Re: Opening a new HSA

Post by carmonkie » Wed Jan 08, 2020 12:52 am

I am very happy with my Fidelity HSA and highly recommend. I use 2 Zero Fee funds and the Total Bond equivalent at 0.02% fees. My employer contributes every two weeks and I move the money the day they are deposited. I am lucky because the transfer cost me 0. I just leave a few pennies there. It takes about 1 week by the time I e-mail the form to Discovery Benefits and when it shows up in Fidelity.
It is a bit of work, but happy that all the HSA money is in the market.

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telemark
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Re: Opening a new HSA

Post by telemark » Wed Jan 08, 2020 1:43 am

annu wrote:
Tue Jan 07, 2020 11:02 pm
I am sorry, my thoughts some times do not translate into texts or for that matter any other for of communication for that matter :-)
I was referring to this https://hsastore.com/learn/taxes/hsa-tax-deduction
Very little about tax law is subject to concise explanation. I think I understand the issue now, and it answers my question re possible benefit reductions. Thanks for posting that.

ExPatKiwi
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Re: Opening a new HSA

Post by ExPatKiwi » Wed Jan 08, 2020 8:07 am

carmonkie wrote:
Wed Jan 08, 2020 12:52 am
I am very happy with my Fidelity HSA and highly recommend. I use 2 Zero Fee funds and the Total Bond equivalent at 0.02% fees. My employer contributes every two weeks and I move the money the day they are deposited. I am lucky because the transfer cost me 0. I just leave a few pennies there. It takes about 1 week by the time I e-mail the form to Discovery Benefits and when it shows up in Fidelity.
It is a bit of work, but happy that all the HSA money is in the market.
I'm looking at doing something similar but the question is how often can a rollover be completed in the same calendar year? I was under the impression it could only be done once.
Last edited by ExPatKiwi on Wed Jan 08, 2020 9:02 am, edited 1 time in total.
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RickBoglehead
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Re: Opening a new HSA

Post by RickBoglehead » Wed Jan 08, 2020 8:11 am

ExPatKiwi wrote:
Wed Jan 08, 2020 8:07 am
carmonkie wrote:
Wed Jan 08, 2020 12:52 am
I am very happy with my Fidelity HSA and highly recommend. I use 2 Zero Fee funds and the Total Bond equivalent at 0.02% fees. My employer contributes every two weeks and I move the money the day they are deposited. I am lucky because the transfer cost me 0. I just leave a few pennies there. It takes about 1 week by the time I e-mail the form to Discovery Benefits and when it shows up in Fidelity.
It is a bit of work, but happy that all the HSA money is in the market.
I'm looking at doing something similar but the question is how often can a rollover be completed in the same calendar year? I was under the impression it could only be down once.
Transferring assets directly from one custodian to another is not a rollover, and there are no limits on the amount of times this can be done.
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jeroly
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Re: Opening a new HSA

Post by jeroly » Wed Jan 08, 2020 8:15 am

Am I missing something or are the Health Equity fees waived if you maintain $2,000 in the savings account? My understanding was that they offered Vanguard index funds with low expense ratios.

carmonkie
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Re: Opening a new HSA

Post by carmonkie » Wed Jan 08, 2020 11:09 am

RickBoglehead wrote:
Wed Jan 08, 2020 8:11 am
ExPatKiwi wrote:
Wed Jan 08, 2020 8:07 am
carmonkie wrote:
Wed Jan 08, 2020 12:52 am
I am very happy with my Fidelity HSA and highly recommend. I use 2 Zero Fee funds and the Total Bond equivalent at 0.02% fees. My employer contributes every two weeks and I move the money the day they are deposited. I am lucky because the transfer cost me 0. I just leave a few pennies there. It takes about 1 week by the time I e-mail the form to Discovery Benefits and when it shows up in Fidelity.
It is a bit of work, but happy that all the HSA money is in the market.
I'm looking at doing something similar but the question is how often can a rollover be completed in the same calendar year? I was under the impression it could only be down once.
Transferring assets directly from one custodian to another is not a rollover, and there are no limits on the amount of times this can be done.
Thanks Rick..
Check the transfer options. In our form, there are various options. Rollover, Transfer and close, Transfer and leave open.
I use Transfer an leave open. Make sure you find out any transfer fees. I have seen people here posting 25-30 per transfer. This would be a deal breaker and I would just do it once a year instead. My old custodian used to deduct quarterly fees. Once you see this, you start to understand what fees does to your investments. Highly recommend Fidelity HSA.

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Re: Opening a new HSA

Post by grabiner » Thu Jan 09, 2020 10:46 pm

lexor wrote:
Tue Jan 07, 2020 12:19 am
Reading more about it my understanding is the same as yours and we can contribute straight to Fidelity.

However, I suppose there is some disadvantage in the tax deduction route because you'd get the tax break much later. 10 months later on average? So you'd miss out on roughly 3500*.25*.07*(10/12) or ~$51/year (With 25% tax. Check my math)

"contributions are tax-deductible, or if made through a payroll deduction, they are pretax." https://money.usnews.com/money/personal ... s-accounts
You can make up for this by adjusting your withholding. If you contribute $3500 out of pocket to an HSA, you can file a W-4 with your payroll office asking to be withheld on $3500 less income. The new IRS Form W-4 allows you to make this adjustment in dollars of deductions, rather than the old rule of converting it to a withholding allowance,
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masrepus
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Re: Opening a new HSA

Post by masrepus » Thu Jan 16, 2020 12:28 pm

jeroly wrote:
Wed Jan 08, 2020 8:15 am
Am I missing something or are the Health Equity fees waived if you maintain $2,000 in the savings account? My understanding was that they offered Vanguard index funds with low expense ratios.
For my plan sponsored by the employer, they cover the monthly fees. 2000.00 is a common tier in my plan. 2000.00 is the tier when the interest bearing goes up a smidge and it is also the amount required before I can use the investment option.
Edit to add: The investment fees on the account are 0.03% /month, capped at 10.00/month.

I find it very difficult to find information. Typically there are plan documents either via the company HR or the plan administrator, but I can't find anything useful on the Health Equity HSA beyond marketing collateral. I had to open a case directly with Health Equity to get information, and even then it wasn't in a document - it was just a response.
Last edited by masrepus on Thu Jan 16, 2020 10:07 pm, edited 1 time in total.

classicindexer
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Re: Opening a new HSA

Post by classicindexer » Thu Jan 16, 2020 2:13 pm

jeroly wrote:
Wed Jan 08, 2020 8:15 am
Am I missing something or are the Health Equity fees waived if you maintain $2,000 in the savings account? My understanding was that they offered Vanguard index funds with low expense ratios.
Self directed investing fees are typically not waved, although it can vary based on if the employer pays some or all fees. Previously DW’s employer paid the monthly admin fee but it was only for the savings account. About 35bp was the self directed investing fee. After DW left that employer a monthly admin fee of about $4 started being charged.

Spirit Rider
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Re: Opening a new HSA

Post by Spirit Rider » Thu Jan 16, 2020 3:45 pm

masrepus wrote:
Thu Jan 16, 2020 12:28 pm
I find it very difficult to find information. Typically there are plan documents either via the company HR or the plan administrator, but I can't find anything useful on the Health Equity HSA beyond marketing collateral. I had to open a case directly with Health Equity to get information, and even then it wasn't in a document - it was just a response.
Any plan document involving HSAs would be only be with regards to eligibility and contributions. Unlike a 401k an employer (HR) and the Section 125 plan administrator has no involvement with the HSA account other than possible paying fees, once the contributions are made.

An HSA account is like an IRA account. It is 100% owned and controlled by you. Any operational details of the HSA account have nothing to do with your employer. That is entirely a function of the HSA custodian.

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