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Best HSA Custodian?

Written by Nickel - 58 Comments

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
Modified on September 13th, 2010 - 58 Comments
Filed under: Insurance, Saving & Investing

About the author: 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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58 Responses to “Best HSA Custodian?”

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  1. 1
    Shaun Says:

    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.

  2. 2
    Anthony Says:

    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!

  3. 3
    Kevin@OutOfYourRut Says:

    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.

  4. 4
    Ashley Says:

    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.

  5. 5
    Dion Says:

    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

  6. 6
    Brad Says:

    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.

  7. 7
    Jonathan Says:

    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.

  8. 8
    John Says:

    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.

  9. 9
    Garry Says:

    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.

  10. 10
    Steve Says:

    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.

  11. 11
    Dion Says:

    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.

  12. 12
    ryan Says:

    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.

  13. 13
    Mark Says:

    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.

  14. 14
    Al Says:

    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.

  15. 15
    Susan Says:

    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!

  16. 16
    cemccon Says:

    Be sure to check out Principal Bank

  17. 17
    fairydust Says:

    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.

  18. 18
    Melissa Says:

    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.

  19. 19
    Stephanie Says:

    My HSA is through B of A and there are no fees.

  20. 20
    Patty Says:

    #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!

  21. 21
    Jason Says:

    Check out Patelco Credit Union.

  22. 22
    George Says:

    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.

  23. 23
    E.C. Says:

    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.

  24. 24
    Charlie Says:

    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.

  25. 25
    Sam Says:

    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?

  26. 26
    Melissa Says:

    @Sam

    It must be designated as an HSA account. It cannot be a regular checking or savings account.

  27. 27
    Brian Says:

    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.

  28. 28
    Mary Says:

    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.

  29. 29
    Jean Says:

    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.

  30. 30
    Jonathanl Says:

    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.

  31. 31
    Alain Says:

    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!

  32. 32
    D. Rich Says:

    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.

  33. 33
    Jean Says:

    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.

  34. 34
    Dan Says:

    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.

  35. 35
    frank s Says:

    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.

  36. 36
    Chris J Says:

    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.

  37. 37
    Jenni B Says:

    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.

  38. 38
    Dave D Says:

    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.

  39. 39
    Jay Marbelous Says:

    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.

  40. 40
    Jim Says:

    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?

  41. 41
    Jenni B Says:

    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

  42. 42
    Rand Says:

    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.

  43. 43
    Mike L. Says:

    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.

  44. 44
    Elaine Says:

    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.

  45. 45
    David Says:

    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.

  46. 46
    D.K. Says:

    Just got a notice from Bancorp Bank HSA that there will be a new $1.25 / month fee for paper statements starting 7/1/12.

  47. 47
    Chuck Says:

    The question was about investment options. I saw two answers that seemed reasonable to me. One was HSA bank. The other was Vanguard. Each seems, apparently, to give access to a wide range of investment options. That’s important to me. My HSA is not with either right now, but I will look at them. The other factor to me is costs. $30/year does not deter me, and I’m used to keeping at least $1,000 uninvested earning almost no interest. Some HSAs I’ve reviewed require up to $10,000 to be invested in only selected funds, and then more flexibility above that. Doesn’t work for me. HSAs are wonderful, but having reasonable investment choice and ongoing expenses are important unless you just plan to draw all your funds back out every year.

  48. 48
    Sarah Says:

    I just got notice that Bancorp HSA will be charging $2.50 monthly fee plus a $1.50 fee if you need paper statements instead of email. So I’m switching, not to PNC Bank, which has a $3.95/mo fee unless you have 5K in the account, but to Optimum Bnak where there’s a $1/mo fee and my husband already has an account.

  49. 49
    Dilip Says:

    Any updates on where to find current best HSA?
    Any website showing options?

    My company flipped from an HSA last year to now only option HSA that can’t rollover. Now I have to find somewhere to put my orphaned HSA.

    Contributing to my own HSA, I’m a little confused if its a good idea still. I am not self employed, and company has a FSA type account. Is there no point to owning HSA except as an extra ROTH IRA solution available?

  50. 50
    andy Says:

    I agree with those who have had a terrible time dealing with Mellon Bank HSA. The customer service are offshore and hard to understand and they don’t understand US issues at all. It takes me an hour to explain and resolve something that would take a US based CS 5 minutes to handle. They don’t understand any US tax terms or the need to get accurate forms.

    I’ve had inaccurate 5498-SA forms for 2 years due to Mellon’s error and can’t seem to get it corrected. CS is polite, but slow, inane, and incredibly frustrating. I found out they didn’t resolve last years tax form issue (12 months after I called to correct it) when the IRS sent me a letter. AVOID MELLON HSA and save yourself trouble and fees.

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