My New HSA Strategy – Rollovers and Trustee Transfers
Since my company was acquired by an even larger one last year, 2013 will be our first full year under the new administration. That means a whole lot of changes to our benefits and one of those will be to our HSA provider. Although the HDHP insurance portion will still be served by Aetna, our HSA provider will be switching from Fidelity to Chase. Chase is similar in respect to Fidelity but their investing options are more expensive and more limited. And since I don’t rely on my HSA for medical expenses, low cost/low fee investment options are very important to me.
If you’re not familiar with what an HSA is, it’s the only investment that allows for triple tax savings: the money you put in isn’t taxed, your earnings aren’t taxed, and the money you take out isn’t taxed. I think the HSA is a no-brainer for anyone who’s young and healthy and it probably even makes sense if you’re not. An HSA must be paired with a HDHP in order to contribute, but after that, it’s yours to keep for the rest of your life.
My Fidelity HSA
Currently, I have about $10k invested in TIPS in my Fidelity HSA(TIPS earnings aren’t taxed locally and CA is one of the few states that does not recognize an HSA yet). Fidelity charges me $12 a quarter just to hold my HSA and $10 for every investment trade I make. $48 a year in fees plus 1 trade a year at $10 = $58. $58/$10,000 means I’m paying at least .58% in fees every year, which isn’t horrible but it will make a big difference over the long run. I’ve been stuck with Fidelity for three years, since in order to get my company contribution and save on FICA taxes, my HSA contributions must be made through my employer’s plan.
My New Chase HSA
My new Chase HSA has no account maintenance fees but if I want to open an investment account, there is a $2.50 monthly charge and trades are $10 each. My ER on $10,000 in assets would be .4% per year plus any additional fees built into the funds I invest in. Chase only offers 10 index funds that all come with high ER’s(> .5%), so my effective fee would be 1% a year or maybe even higher. As soon as I saw that, I knew I had to find a better option.
What’s the Simplest Solution?
Here’s what I decided to do. I took $10,000 from Fidelity and did a trustee to trustee rollover to HSA Bank where they have no fees as long as you hold $3,000 in a savings account. If you’d like to make investments, you need to hold $5,000 in your savings account(leaving me only $5,000 to invest). There’s no fee on Fidelity’s side or HSA Bank’s side for doing this but if your bank does try to charge you a fee, you can do a self rollover(but only once every 12 months). In order to use this method, you would need to write a check from your old HSA to your new HSA provider. Then, all you’d have to do is report it as a ‘rollover contribution’ on your taxes on form 5498-SA, Box 4(Thanks TFB!)
No Fees Please
The best thing about HSA bank is that I won’t pay any fees as long as I stay above the designated 3k or 5k thresholds. As for the investment side, you can actually link your HSA Bank account to an investment account with TD-Ameritrade where they offer over 100 free, no fee ETF’s. That way, I can buy and sell Vanguard ETF’s for free and pay very low expense ratios on those funds. If you don’t have that much money saved up, it would probably make more sense to go with a credit union HSA since they usually offer competitive CD rates with low minimums.
Using this strategy, I won’t pay a single fee, even with two accounts. I’ll always have to contribute to my Chase HSA but at the end of each year I can do a trustee to trustee rollover for free. These types of rollovers are unlimited where as if I used the other method of writing a check, I could only do that once every 12 months. Should either bank start charging a fee, I still have a few options to self rollover my money though:
- Write a check(but you may have to pay for a checkbook) and send it to HSA Bank
- Pull money out from the ATM using my free debit card(Chase ATM’s would be free) and then write a personal check to HSA Bank.
- Try to withdraw money from a teller at Chase bank for free and then write a personal check to HSA Bank.
- Direct transfer from my Chase HSA to my personal checking account and then write a check to HSA Bank
I think I got kind of lucky since Fidelity, HSA Bank and Chase all don’t charge fees to do trustee to trustee rollovers(which are unlimited btw). This is very uncommon, but should any of them change their mind in the future I can use any of the tips listed above to avoid having to pay fees.
I seriously hate paying fees so I had a ton of fun researching ways in which I could avoid them. I think my solution worked out pretty well since it allows me to rollover my money at the end of each year into my HSA Bank account where I can invest in some great low cost and no fee ETF’s with TD-Ameritrade and I never have to pay another dime in fees to Fidelity.
Readers, have you signed up for an HSA yet? Have you had to rollover your HSA or did you even know it was possible to do this?
-Harry @ PF Pro
- Annual Enrollment Time: How Much Can a HSA Save You?
- Reader Question: Health Savings Account Explained