Hi Friendos,
Today is yet another newsletter about HSAs, this one focused on a scary topic suitable for this Halloween month: creeping investment admin fees and one way to mitigate them.
I opened my HSA account at the end of 2019 when I first got on a high deductible health plan through my employer. My employer selected HealthEquity to administer its sponsored HSA account. Although I could have opened my own HSA account elsewhere, I chose HealthEquity for two reasons: (1) going with the employer-sponsored HSA was the only way I could get the annual contribution offered by my employer (they put $ in my account on my behalf…very nice), and (2) it was the only way I could make contributions via payroll deductions and shelter that income from both payroll taxes and income taxes.
I was very happy with the low-cost index fund offerings in the HealthEquity investment lineup. I was not happy with the requirement to keep $1,000 in cash and earn pennies of interest on that each year, but so be it. Also, HealthEquity charged an “investment administrative fee” of 0.03% per year on the average invested balance. This fee was capped at $10/month. Mmm, fine.
I maxed out my contributions each year and invested in a total stock market index fund that had good performance, so my invested balance increased every year, as did the admin fee calculated as a % of that balance. The admin fees were deducted from the first contribution I made each month (from the first paycheck I got each month) and then what remained would be invested in my selected index fund.
Here are the admin fees I paid each year, as summarized on my account statements:
- 2020: $27.69
- 2021: $68.52
- 2022: $92.56
- 2023: $115.90
- 2024 (through September): $90
These seem like a lot considering that HealthEquity wasn’t doing much—moving the money around (by computer) and sending me account statements (electronically)—it seems like the same amount of work regardless of how much I already had invested. In 2024, I had my HSA contributions set up so that I put $276.92 into the HSA every paycheck, which HealthEquity sent directly into a Vanguard mutual fund. But HealthEquity charged me more for this service last month than it did last year, simply because my account balance had grown. This logic is the same reason I dislike financial advisors that charge a % of assets under management rather than a fixed fee.
I’ve recently been working on streamlining and simplifying my personal finances and realized that, since I recently left the employer sponsoring this HSA plan, there was no reason to continue with this HealthEquity account and pay these particular fees. Fidelity offers HSA accounts with no administrative fees on the invested balance and is top-rated for HSA accounts overall – why pay a fee if you don’t have to? I also happen to have other investment accounts at Fidelity and it would be simpler to eliminate one of the financial institutions I do business with (and receive statements from).
On Fidelity’s website, I opened an HSA account with Fidelity and started the process to transfer assets from HealthEquity to Fidelity. That took well under 10 minutes and the assets should fully move over within the next week or so. It was like rolling over a 401k, which I’ve done several times before.
I now realize that I could have paid a few hundred dollars less in fees by doing occasional rollovers out of HealthEquity into a lower cost HSA account. The same reasoning applies if your employer-sponsored HSA only offers high-cost investment options. Well, if any of my former colleagues are reading this, I recommend you consider this technique! Also, talk to HR about getting a better HSA provider! (This may be more effective if you do it as a group.) The HSA marketplace has evolved substantially in the last several years and you deserve better.
-Stephanie
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