In response to my post about the best HSA for investing, a reader named Mike asked for details on what I termed the “excessive” fees at HSA Administrators.
My response wound up being rather lengthy, so I decided to make it a post of its own vs. slapping it up as a comment. So, here it is.
For starters, we’re not talking about vast sums here, so it may not be worth moving your money if you already have an account with HSA Adminstrators. But I’m setting up a new account so I will of course choose the cheaper option (all else being equal).
Looking at the numbers, HSA Adminstrators has a $45 administrative fee that cannot be waived. On top of that, there is a custodial fee of 0.0008 per quarter times account balance calculated on the first $20k held in each mutual fund.
Thus, if you have $20k (or more) in a single fund, you’ll pay 4 x $16 = $64 per year. If you have money in multiple funds, then you’ll have multiple $20k limits before this fee is capped.
So let’s assume that you have $20k (or more) in a single mutual fund. In that case, you’ll pay $45 + $64 = $109/year in fees at HSA Administrators. With a higher total balance spread across multiple funds, that custodial fee would creep upward.
At HSA Bank, you would pay nothing if you’re willing to park $5k in their savings account at 0.50% APY.
If you keep less than $5k but more than $3k in savings, you’ll pay $36 in fees (i.e., $3/month for the investment account).
If you’d prefer to keep even less in the savings account (less than $3k, all the way down to nothing), you’ll pay a grand total of $66/year in fees — that’s $2.50/month for the savings account and $3/month for the investment account.
Yes, I recognize that there is an opportunity cost to keeping the money in the savings account, but even if you keep your savings balance at zero (and pay the full fees) you’ll still come out ahead vs. HSA Administrators.
A couple of other differences:
- HSA Bank’s fund selection is somewhat larger, including 35 Vanguard funds plus funds from several other families. That being said, the fund selection at HSA Administrators (22 different Vanguard funds) looks fine for most.
- With HSA Bank, you’ll invest using ETFs instead of traditional mutual funds. HSA Adminstrators uses Vanguard mutual funds, though there are Admiral shares available for a number of them, so the expense ratios will be competitive.
Are these differences worth the trouble of moving? Maybe, maybe not. That’s up to you. But if you’re choosing between the two for a new account (like I am), then HSA Bank looks like a better bet.
P.S. If you do go with HSA Administrators, it looks like you can pay that $45 administrative fee from outside funds as long as you catch it in time. Otherwise they’ll take it from your HSA balance. Given the limits on HSA contributions, you may want to pay that fee with non-HSA dollars.