Best HSA Custodian?
Tip It!As a followup to my earlier post about high deductible health plans, I’m curious if you guys have any recommendations when it comes to health savings account (HSA) custodians. My employer has picked one, but their terms aren’t great (too many fees) so I’m thinking of looking elsewhere.
As I noted previously, you’re free to use whoever you want as an HSA custodian. The only downside is that I won’t be able to have the contributions withheld from pre-tax dollars if I don’t use my employer’s preferred HSA custodian. Instead, I’ll have to wait until the end of the year to deduct our contributions.
Published on November 16th, 2009 - 45 Comments
Filed under: Insurance, Saving & Investing
About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!
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November 16th, 2009 at 2:29 pm
Our company uses Discovery Benefits and it works out well. Their site is pretty basic, nothing fancy, but it keeps track of everything and gets the job done.
November 16th, 2009 at 2:35 pm
The company I work for is with ACS|Mellon (hsamember.com). I like it just fine, given the following:
1. I have never dealt with another HSA custodian before.
2. I have a small amount in my HSA and can only take advantage of the savings feature at this time. I have to have $2000 to begin investing. The investment options are limited, but I cannot comment for or against them at this time.
Generally though, I really like the idea of an HSA. My wife and I are healthy people, so a high deductible plan is ideal for us. Meanwhile, I am saving in my HSA before taxes, interest earns tax-free, and I am not taxed on medical expenses. It is the tri-facto of tax goodness!
Also, the company I work for contributes free money twice a month. It’s great!
November 16th, 2009 at 2:39 pm
Your regular bank might be the best option. Since there’s a high likelihood you’ll tap the account during the course of any given year, you want an account that will be simple, local, easy to access and with the lowest fees.
What you don’t use in the account can be retained and treated like an IRA, but since it’s health account first and foremost, you don’t want to get too fancy and tie it up either.
It’s my understanding that the money can be used for soft medical costs too, like non-prescription meds, vision and dental, and virtually anything health related, even if it isn’t prescribed by a doctor.
November 16th, 2009 at 2:45 pm
I use HealthEquity through my employer and they are AMAZING. In addition to the debit card (which I’m sure is standard most places), their online reimbursement for items you can’t put on the card is incredibly easy. No submitting receipts or long waits, it’s in your bank account within 2 days, and it only takes 3 – 5 minutes to submit one online. Their online interface is fantastic.
November 16th, 2009 at 3:25 pm
Stanford Federal Credit Union
4%+ interest-rate on HSA checking account
Since it’s a credit union, make a $15 donation (tax-deductible) to the Friends of Palo Alto library to become eligible
November 16th, 2009 at 3:38 pm
My company is also with ACS|Mellon (hsamember.com). It does the job, but nothing too fancy. You essentially get a debit card and checkbook. You get customer support out of India and they pretty much go by script (I had a bad experience with their customer no service charging for a debit card and checks that I never received).
It would be nice if you could do online transfers to your bank instead of writing yourself a check. If it weren’t for the company contribution, I would probably turn elsewhere.
November 16th, 2009 at 4:30 pm
Stanford CU and Alliant CU appeared to be best the bets for me. I ended up going with Stanford. Many options to become eligible to join either CU.
November 16th, 2009 at 5:08 pm
My old job allowed for an HAS throughh First HSA (1hsa.com)/ Leesport Bank. They have a great website, althought I have no other to compair it to. The account fee is $3/month; not sure if that is standard. The interest rate was terrible. A minimum of $3000 is needed to start investing.
November 16th, 2009 at 5:30 pm
Ck out Merrill Lynch, $0-low fees, and you can invest in stocks or mutual funds, etc. Been using them for three years after doing the same search you are doing.
November 16th, 2009 at 5:34 pm
I use (and love!) http://www.hsaadministrators.com/ They have low rates and offer Vanguard index funds. I’ve been with them about 5 years and they are great to deal with.
November 16th, 2009 at 6:04 pm
I would not recommend HSA bank. Monthly fees eat up your returns, and you need a minimum $2500 or $3000 just to avoid monthly fees and earn minimal interest.
November 16th, 2009 at 7:06 pm
I also use HSAbank. To retort comment #12, the monthly fees are $2.50. So $30 a year.
They are paired with TDAmeritrade, so you invest through them and have the option to buy anything that is available at Ameritrade.
November 16th, 2009 at 7:55 pm
I would recommend using your employer’s custodian and then transfering the funds to your preferred custodian. The reason is that if you have the contributions withheld from your paycheck, you save the FICA tax! Unlike the income tax, as far as I know, there is no way to get back that FICA deduction after the fact.
November 16th, 2009 at 11:09 pm
My employer went with Fidelity. Can’t really complain, have access to an ATM card or you can just call for a check. Tons of investment options. Haven’t seen any annual charges of any kind. Also its nice since my Roth IRA/HSA/401k are all linked under one log in.
November 17th, 2009 at 8:31 am
I LOVE!!!! our health insurance plan. On second thought … I think it may be different from what you are referring to … a HSA Health Savings Account.
It is Anthem (previously LUMENOS) under Blue Cross Blue Shield. The premiums are about 1/3 of the cost of traditional health insurance, i.e. than the PPO or the regular Blue Cross Blue Shield insurance.
Our employer puts $2000 every July 1 into a Health Savings Account for us (which accumulates year over year). All preventive care is paid for at 100% without any copays.
All other medical care (besides preventative) comes out of that $2000 per year (the account accumulates fter a few years).
If you spend your entire HSA … then there is a bridge of $1600 that you would be responsible for, than it goes to traditional insurance.
The amount we save in premiums in each year is about $1200. After 4-5 years we have never spent the entire HSA ($2000 per year accumulated) amount. Even if we did, we would only “lose” $400 … because the savings in premiums will offset the other $1200 of the “Bridge” amount.
The best part of all … now we have a reason to ask an extra question or two about the costs of the medical care, the prescriptions, the cost / benefits of the doctor’s prescribed course of treatment. This gives us a greater understanding of the choices and keeps our medical costs down. They have even found that for I think it was about 20% of their Lumenos customers, people made changes to their lifestyles in order to save money on medical costs.
Good luck with your search!
November 17th, 2009 at 9:15 am
Be sure to check out Principal Bank
November 17th, 2009 at 10:07 am
This is terrible to admit but I don’t even remember how it all happened last year when I first set up my HSA. I ended up with PNC bank, and I don’t think all that much of their service in general, so I’m guessing that was the bank suggested when I signed up for my HSA account, and I just went with the suggestion.
The HSA account is managed by http://www.smart-hsa.com. There is a $6.50/mo fee that our employer pays (we have no choice but to take the high-deductible health care plan, so I guess that’s why they pay the fee for us), and the minimum to start investing is $500, but I never got to that point because I sucked the money out pretty much as soon as it was deposited to help pay off the $1500 deductible that I’d already hit in January of last year.
Anyway, I don’t know how the smart-hsa.com plan compares to anyone else’s but I have had no problem with the account at all – using a debit card or requesting a fund transfer. All very easy to do online.
November 17th, 2009 at 11:05 am
I use Alliant CU. I hadn’t heard of Stanford CU when I opened my account with Alliant. I’m really happy with the service, interest rate and lack of fees. Before you switch custodians, I would look at your paystub and determine if your HSA contributions are also pre-SS and Medicare, as well. If they are pre-FICA tax, that alone is a huge savings that you don’t recoup on your tax return. Your company must have a 125 plan to deduct your contributions pre-FICA tax, I believe.
November 17th, 2009 at 2:30 pm
My HSA is through B of A and there are no fees.
November 17th, 2009 at 5:45 pm
#9 @Gary – me too, Merrill Lynch is just great – zero fee, debit card and check writting privileges if you need to.
just make sure that you get all of your allowed contribution in for the year. You have until 4/15th of next year to make your contributions. Especially true if you can not make a deductible IRA contribution as this contribution is deductible!
November 18th, 2009 at 2:48 pm
Check out Patelco Credit Union.
November 18th, 2009 at 11:25 pm
my company went from mellon bank to Alliant as the manager of our HSA and I have been pleased with the transfer. Both gave a debit card and checks but Alliant has been a little more user friendly and the interest rate has been better. I have the ability to transfer the money into a mutual fund but I felt that I may need it at any time and have decided to let it ride with the interest on the account.
November 22nd, 2009 at 1:17 pm
Thank you so much for this post! I have a high deductible plan that qualifies me for an HSA, but I haven’t opened one because the one offered by my employer has a ridiculous fee structure that would have pretty much negated the tax benefits. I had no idea I could pick my own custodian.
December 1st, 2009 at 2:26 pm
I signed up my family a couple of years ago, and use Sovereign bank. They had the least fees / best options in my search. Stanford CU sounds interesting though.
December 15th, 2009 at 3:14 pm
Can anyone clarify? My regular bank offers a regular interest bearing savings and checking account with NO fees ever. Can I just fund the savings account, then transfer to checking and pay for services as needed? Does the type of account need to be “labeled” as an HSA account or can you just use ANY account for HSA use?
December 15th, 2009 at 4:26 pm
@Sam
It must be designated as an HSA account. It cannot be a regular checking or savings account.
December 15th, 2009 at 8:05 pm
ACS Mellon has terrible customer service and high fees. I changed jobs and have ~$3K in my HSA. I need to update the address they have for me. I used the secure message center at their web site, and the response was to call. I called, entered various authentication info, walked through the menus to reach a rep and told her I wanted to change my address. She asked for the *same information* I had just entered via touch tone phone, and I had the pleasure of phonetically spelling out much of it because *she* couldn’t understand *me* (India). I waited and was finally told that I have to mail in a signed letter.
So why not print that on mailed statements, or make it available in the online FAQ, or in the recorded phone info, or in response to my initial email or when I first told the CSR I wanted to change my address (before 2 minutes of reauthentication) …?
I am definitely moving, Space Coast Credit Union seems like a good option too.
December 28th, 2009 at 10:20 am
The news that a bank HSA was being processed by a non- bank ( Canopy) and that HSA funds were in a bankruptcy filing is surprising. How do you determine that your bank or Credit Union HSA actually has the federal bank or credit union insurance?
I use Stanford Credit Union and they do indeed have a third party company listed on their paperwork.
January 1st, 2010 at 11:28 pm
I just started HSA last month for 2009. I am self-employed and was able to give the max contribution for 2009 in December. Is it ok to leave that money in this particular HSA custodian and start a 2010 contribution with different bank? Its just that i found a better rate bank for the HSA but do like the first bank. Though it seems that bank constantly changes their rate.
January 2nd, 2010 at 11:28 am
It’s my understanding it’s one bank/account per one health plan. Just roll over the “2009″ account to the “2010″ account at the new bank. Transfers and rollovers are common.
May be fees involved so be sure to ask. Also, may behoove you to transfer from bank to bank as opposed to getting them to cut you a check and you deposit to new bank. IRS generally likes for money to never touch your hands. Shocking I know.
March 15th, 2010 at 3:56 pm
I too use Health Savings Administrators with Vanguard. You have access to 22 funds to choose from. These vary in risks. You also have access to 10 Admiral funds without meeting the required $100K minimum deposit. Its great!
March 28th, 2010 at 1:48 am
Don’t use ACS Mellon. They have the worst customer service. I left my job with $700 in my HSA and have tried for the last 2 years to get the money out. ACS Mellon charges a monthly fee and now I only have $500 left in my account and I haven’t made any withdrawals. THEY TOOK $200 IN FEES!!! Customer service is overseas and terrible. My address is wrong and I call to fix it but they still send my documents to my old address. They are clueless and don’t care. They will probably keep the $700 because no matter how many times I call, I can’t get my money out.
March 28th, 2010 at 11:16 am
I just started HSA late last year, i am self-employed. did a lot of research and found Alliant CU with the most interest rate and no fees. but i didnt find out about Standford CU until after i already signed up with Alliant. Standford does have higher interest rate but i think they dont have options for investing like in Alliant. and i do like that Alliant savings and checking both have better interest rate than BOA which i use for personal and business accounts. havent used any of my HSA deposits so not sure about their customer service.
July 6th, 2010 at 4:12 pm
I am trying to deal with Mellon HSA now. They returned four checks that I wrote due to invalid signature. The banks of the provider charged a fee for a returned check, so the providers are passing the fee on to me. When contacting Mellon and telling them the situation they said they are sorry they do not pay third party fees and are not acknowledging they have a flaw in their process and told me I am responsible for the fees of the returned checks.
So now I am out $140.00 because some one of something at Mellon said I did not sign the checks that I signed. Mellon please pay for your mistakes and don’t make your customers pay for them, or soon you will not longer have any customers.
Also bring jobs back home to America and ditch the off shore CR reps, the cost savings is not worth the aggravation to your customers.
October 18th, 2010 at 10:21 pm
ACS Mellon also just started charging 75 cents a month just to have a statement mailed to your house. Glad my employeer is moving to a new HSA bank for 2011. ACS Mellon is awful.
October 27th, 2010 at 1:55 pm
I’ve used HSA Administrators. They charge $39 per year and a very small percent of your account balance. Given that they use Vanguard Institutional funds, the expenses there are low enough to offset any small fees they charge.
When I have called with a question, a REAL person usually answers…not a voice system. The only caveat I have is that I have not had to request withdrawing money from them yet, so I don’t know how easy/difficult that is.
October 30th, 2010 at 11:32 am
DELTA TRUST & BANK – hands down. NO fees, good interest rate, great customer service. They also offer their HSA customers a good interest rate on a non-HSA money market/savings account.
January 7th, 2011 at 1:17 am
I second the opinions about HSA Mellon / hsamember.com – they are horrible. The customer service is the worst of the worst indian call centers run by ACR HR Solutions. They don’t even know their own products. Their website is difficult to use and they hit you with fee after fee. EXAMPLE: if you click the button for “order checks” it automatically orders you checks at $29.99 for one book. There’s no option to say no/cancel or confirm. Then you must call, wait 30 mins online, argue, transfer to supervisor, get hung up on… you know the drill.
This type of thing has happened so often to me I found this site as I was searching on who to switch to.
March 16th, 2011 at 5:33 pm
Avoid Mellon Bank like the plague. Dreadful, outsourced (hard to understand their English) customer service. Insane fees. Will fight you tooth and nail and tack on fee after fee after fee after fee…when you try to close your account. They are simply disgusting.
April 5th, 2011 at 12:32 am
Can anyone tell me what their local banks (with physical branches) charge for HSA account fees? I’m looking. I just looked at the Capital One banking site but they don’t offer HSA accounts?
April 6th, 2011 at 8:56 am
I’ve found that most local banks charge some kind of fee for HSA accounts. If you want a fee free HSA account with good customer service, I highly recommend Delta Trust & Bank in Little Rock, Arkansas. As an added bonus for their HSA customers, they offer an exceptional savings rate on regular savings accounts. You can find info about that on their site as well.
Here is a direct link to their website:
http://www.delta-trust.com/con.....s_hsa.html
June 27th, 2011 at 4:44 pm
A couple years ago Kaiser was suggesting that Alliant Credit Union was an appropriate custodian, so I went with them and am generally satisfied with their 2% annual return and no fees. I have looked into alternative options that would allow purchase of mutual funds but the account setup and administrative fees were high. Vanguard, Schwab, and Fidelity all support the advantages to consumers of HSA accounts combined with high-deductible health insurance plans, but none of those companies have setup their own in-house HSA custodial products to provide customers with the option to place their HSA contributions into low-cost, low-fee mutual funds.
One frequently cited explanation for this is that the primary purpose behind the HSA is to pay medical and other health-related expenses, the need for which often occurs unexpectedly over time. So mutual funds, which are typically viewed as a long term investment vehicle, are believed to be not well suited as the basis for a mechanism to pay for “random” health care needs. But it’s not clear to me that this argument is dispositive on the HSA matter.
July 8th, 2011 at 11:08 am
Benefit of HSA:
1) Contributions are tax DEDUCTIBLE (reduces your taxes).
2) Earnings are tax FREE.
3) Withdrawals are tax FREE, if for qualified medical expenses.
Because of the triple tax benefit, invest in the HSA before ROTH or IRA. Only the employer match of a 401(k) beats the HSA.
Because earnings grow tax free, I would NOT use the HSA to pay current medical expenses. I would contribute each year, invest the funds, and then wait until you retire to withdraw to pay medical expenses and Medicare insurance premiums.
HSA Investments:
Interest can be earned via several Credit Unions.
Adirondack Trust = 3.0%
Alliant CU = 2.0%
Standford Federal = 1.5% (2.5% with hi min), $15 join fee
Delta Trust = 1.9%
Mutual Funds:
Watch your investment choices. MANY HSA offered mutual funds have very high Loads (i.e. commissions). Optuum (UHC), and Discover are two examples of accounts that only use very high commission mutual funds.
MyHSA.com (Alliance) offers four no load investment portfolios (Charles Schwab). $4.50/mn fee ($108/yr).
HSAadministrators.com offers 22 no load Vanguard funds. $20 to open account, $39/yr fee + .0008 of the value of your investments.
I am leaning towards either Adirondack Trust or HSAadministrators.
August 15th, 2011 at 7:13 pm
I agree with all the negative reviews of Mellon Bank. It took me a month to get the account set up (because they kept giving me incorrect information) then finally when I was at the last step I realized they had spelled my name wrong. They would not admit they made a mistake and told me I had to open the account with the wrong name (I’m thinking the IRS wouldn’t be a fan of this) and then do a “name change” on the website. That, of course, involved me sending in a copy of my birth certificate and paying a fee. I was livid so I said forget it and never actually opened the account. Now they are trying to tell me I owe them a set-up and closing fee! Crazy.
HSA Bank has really high fees too. I have most of my retirement funds with Fidelity so I’m thinking I may just go with them (it’s not clear on their site that they have HSAs but they do). It’s $48/year plus $10 if you want checks, but then they open up most of their investments to you and if you have certain minimums (very high) across all your accounts they start waiving fees.
October 21st, 2011 at 10:55 am
AVOID Mellon Bank HSA – took them two months to get an account set up. They charge per month fees. They charge for a credit card for the account, they over charge for checks. At year end I switched plans through my employer and was no longer eligible for a HSA, but that didn’t stop Mellon from charging their monthly fees, and they do not close an account with a negative balance. They will not close the account after a secure email. You have to call in and deal with their voice response system to get to a live person in order to close the account. I wasted at least an hour on the phone with them trying to close the account….and then they wanted me to send them a check for the service fees which accumulated on an account which was supposed to have been closed. GO elsewhere and avoid Mellon.
And if all that wasn’t enough for you, Mellon has had a number of instances where people have broken in and stolen personal information files from them. Good luck getting your personal information back after it’s stolen. Simply google Mellon and personal info and you’ll see a bunch of horror stories.