December 14, 2013
Shopping for Investments in a Health Savings Account (ANN CARRNS, 12/12/13, NY Times)
Posted by Orrin Judd at December 14, 2013 8:39 AM
There are now about nine million H.S.A.'s with total assets of more than $18 billion; the average account balance is about $2,000, but accounts with funds in investment options, rather than just F.D.I.C.-insured accounts, average about $10,000, according to Devenir, which is based in Minneapolis and provides investment plans for H.S.A.'s. For 2014, you can contribute as much as $3,300 as an individual and $6,550 for families. So if you haven't had to tap the funds for a year or two, you may have a significant balance that you'd like to invest for longer-term expenses. "You're looking at it with a different lens," said Liz Ryan, head of health benefits services at Wells Fargo.If your employer offers an H.S.A. along with your high-deductible health plan, it's usually simplest to use that account. Companies often contribute to the accounts to encourage workers to use them, and your own pretax contributions can be withdrawn automatically from your paycheck. "You can't overstate the convenience factor of using your employer's plan," said Christine Benz, director of personal finance for Morningstar.If your employer doesn't offer an H.S.A., however, or if you buy insurance on your own, you'll want to shop around. Some account providers -- known as "custodians" -- offer the accounts through employers only, but many offer them directly to individuals.What criteria should you consider? Ease of use (a debit card or online banking, for instance, makes it easy to use your money when you need it); availability of investment options, if you're thinking long-term; and fees, which can eat away at your savings, said Roy Ramthun, founder of HSA Consulting Services, which advises employers and account providers. "These are banking products, and banks charge fees for a number of things," he said.Typical fees might include account setup and closing fees, monthly or annual maintenance fees and additional fees for using an investment account. Not all banks charge all fees, however, and many are waived if you maintain a minimum balance. Most accounts charge flat service fees, so the impact of the fee lessens as your balance grows, Ms. Benz said.Devenir recently has started compiling a list of H.S.A. providers on a new website, www.hsasearch.com. The site lists 31 providers, along with information on fees, interest rates, minimum balance requirements and availability of investment options; it's expected to cover about 50 accounts by the end of the year, said Eric Remjeske, Devenir's president. The site provides links to the providers' websites and includes some ratings from a pool of "several hundred" early users who were asked to comment on their experience; a public forum will be available on the site in a few weeks, he said.Among the largest providers offering accounts directly to individuals are Optum Bank, an arm of UnitedHealth Group; Bank of America; JPMorgan Chase; and HSA Bank, Mr. Remjeske said.Offerings vary widely. Wells Fargo, which reported that it had more than 400,000 H.S.A. account holders with more than $1 billion in assets, offers only Wells Fargo mutual funds. Optum Bank, which said early this year it had more than one million accounts with nearly $2 billion in assets, offers funds from a variety of different fund families. HSA Bank offers self-directed investing through TD Ameritrade accounts.Here are some questions to consider when selecting an H.S.A....