The HSA Report Card

HSA Bank

HSA Bank

 

 

HSA Bank began offering Medical Savings Accounts (MSAs) in 1997. In 2004, the Bank provided an exclusive focus on Health Savings Accounts and quickly gained a nationwide reputation. In 2005, HSA Bank became a division of Webster Bank, N.A., a subsidiary of Webster Financial Corporation, incorporated in Connecticut. HSA Bank currently administers HSAs for 2.7 million members and has over $7 billion in assets. 

 
 

Report Card

for HSA Bank as an investment vehicle

 
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Investment Threshold

The ideal investment Health Savings Account (HSA) has no investment threshold, allowing the very first dollar you contribute to be invested. If you're using an HSA for investment purposes, seek an administrator that does not hold your dollars hostage in a checking account earning little to no interest. 

HSA Bank has established an investment threshold of $1,000. You must always have $1,000 in the HSA checking account. Any excess dollars over this amount can be transferred to the investment account.

 
 

 

Investment Account

HSA Bank offers its participants a pre-selected investment lineup and/or a TD Ameritrade self-directed brokerage account.

Pre-Selected Mutual Fund Lineup

The HSA Bank pre-selected investment lineup is composed of 35 mutual funds with 16 different fund families represented. 54% (19) of the funds in the pre-selected lineup are from Vanguard. The other fund families represented in the lineup are illustrated in the chart below.

The table below displays the number of funds offered for each asset class in the HSA Bank investment lineup.

 
 
Asset Class # of Funds Offered Index Fund Available?
Domestic Large Cap 4 Yes
Domestic Mid Cap 4 Yes
Domestic Small Cap 3 Yes
Foreign Developed Markets Equity 3 Yes
Emerging Markets Equity 1 No
Short & Intermediate Term Fixed Income 8 Yes
Target Date/Allocation 9 Yes
Specialty/Other 3 -
 
 

At The HSA Report Card we are big proponents of passive index investing. Thus, we believe the best investment lineups, at a minimum, should allow participants to build globally diversified, low-cost indexed portfolios. We looked favorably upon administrators that offered low-cost index funds for each of the major asset classes. In the table above, you can see that HSA Bank offers investors low-cost index funds for every major asset class, save emerging markets.

How expensive are the funds in the HSA Bank investment lineup?

In the chart below you can see that when we look at HSA Bank’s investment lineup as a whole, the average expense ratios for the major asset classes are slightly higher than other top administrators.

HSA Bank Investment Lineup

 
 

Bank of Cashton, Lively and Saturna Capital do not offer a pre-selected investment lineup. These 3 adminiistrators only offer self-directed brokerage accounts, thus were not included in the analysis. HSA Bank and Further offer a pre-selected investment lineup and a self-directed brokerage account. 

TD Ameritrade Self-Directed Brokerage Account

 
 
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HSA Bank also offers a TD Ameritrade self-directed brokerage account which gives investors access to stocks, bonds, and mutual funds. TD Ameritrade used to have an awesome commission-free ETF program, which included many low-cost index funds from Vanguard and I-Shares. However, TD Ameritrade recently announced a change in the funds offered via their commission-free ETF program. They dropped all of the Vanguard and most of the I-Shares ETFs on Nov. 21st, 2017.

 
 
For Vanguard loyalists, note that TD has dropped them from their no-fee list, so investors will have to make do with other fund providers.
— ARISTOTELIAN74 (REDDIT)
 
 

Investors can still buy Vanguard and I-Shares ETFs, but have to pay a $6.95 commission for each trade. Unfortunately this will increase transaction costs for those who trickle money into Vanguard ETFs. A potential solution for this group of investors is a systematic investment plan. With a systematic investment plan there is a $49.99 transaction fee on the first purchase, with ensuing contributions being free of charge. Unfortunately, you can only institute a systematic investment plan with mutual funds.

The new TD Ameritrade commission-free ETF lineup is littered with high expense ratio funds, but there are a few low-cost SPDR ETFs from State Street Global Advisors that are suitable for passive index investors. These funds include the SPDR Portfolio Total Stock Market ETF (SPTM), SPDR Portfolio World ex-US ETF (SPDW), SPDR Portfolio Emerging Markets ETF (SPEM), and SPDR Portfolio Aggregate Bond ETF (SPAB).

 TD Ameritrade commission-free ETF lineup



 

Interest Bearing Account

HSA Bank offers participants an FDIC-insured, interest bearing account. Interest bearing accounts make sense for participants who are uneasy about investing their HSA dollars in the equity markets. The interest rate available on different balances is as follows.

Tier Balances APY
Tier 1 $0 - $2,499 .05%
Tier 2 $2,500 - $4,999 .10%
Tier 3 $5,000 - $9,000 .15%
Tier 4 $10,000 - $$14,999 .25%
Tier 5 $15,000 - $24,999+ .35%
Tier 6 $25,000+ .45%
 
 

Fees & Commissions

 
Condensed Schedule of Fees for Standard Plan (Non-Employer Group)
Type of Fee Fee Details
Maintenance $2.50 per month Free (HSA checking balance >$5,000)
Investment $3.00 per month Free (HSA checking balance >$5,000)
Commissions $6.95 per equity trade Commission-free ETFs available
Custodial Fee 0.45% Annually Pre-Selected Investment Lineup
*You may incur a lesser fee than that disclosed to you when your account has insufficient funds to cover the entire amount of the fee.

The HSA Bank pre-selected investment offering now includes a 0.45% annual fee, invoiced quarterly (0.1125% or $1.13 per $1,000). The fee is assessed only on the first $75,000 of the investment account balance. There is a minimum fee of $2.25 per quarter.

 
 

HSA Bank participants can evade the maintenance and investments fees by leaving $5,000 in the HSA checking account. Before opting to leave $5,000 in the checking account, take into consideration the opportunity cost of not investing this money.

TD Ameritrade commissions can be avoided by enrolling in their commission-free ETF program. 

HSA Bank Schedule of Fees

 
 

Tip from a Boglehead - Early each month, they debit the account for $3, so my balance becomes negative ($3), I then transfer $3 from TDA back to cash account, to bring the balance in cash account back to 0. If I leave any balance in the cash account, then they charge additional $2.50 (only up to the available balance in the account, never making the account balance negative, unlike the $3 investment fee). I believe the difference in how they charge the two fees is by design: $3 is for managing the investment account, $2.50 is for managing the cash account. And if the cash account is 0, then it does not need to be managed and no fee charged. - Isui Bogleheads March, 27, 2017


 
 

Tip: To have dividends automatically reinvested consider enrolling in the ETF dividend drip program.

 
 

 

Projected Fees

In this section, we have a little fun projecting fees for each administrator. Our goal was to find the path to the lowest possible fees for each administrator. Keep in mind, we are assuming the HSA is being used solely for investment purposes, therefore only certain fees will apply. Given that every HSA is different, there is no perfect way to compare the top 10 administrators in our study. Nonetheless, we gave it a shot and believe there is value in presenting our findings.

In order to compare fees, we made a few simple assumptions:

  • Every dollar above the investment threshold was invested.

  • Current and future contributions were invested in a single fund.

    • Total Stock Market Index (VTI / VTSAX / SPTM) or S&P 500 index (IVV / VIIIX / VFIAX). We believe these two index funds are one in the same.

  • No transaction fee (NTF) or commission-free ETF programs were utilized to buy the index funds.

  • If these index funds were not available under the NTF and/or commission-free ETF programs, we turned to the open market and executed a single trade per calendar year in order to keep transaction costs down.

For HSA Bank we made the following assumptions:

  1. All assets were invested in SPTM ETF (expense ratio 0.03%)

  2. SPTM is a commission-free ETF. No transactions costs incurred.

  3. Annual Investment Fee: $36

  4. Annual Maintenance Fee: $30

The chart below illustrates the projected fees on different investment balances for HSA Bank.

 
 
 
 

The following chart shows where HSA Bank stands in terms of fees compared to the other top 10 investment HSA administrators. 

 
 

HSA Bank's fees are reasonable, especially as investment balances grow. In our study of the top 10 investment HSAs, HSA Bank ranked as the 6th lowest cost provider.


 
 

 
 
 

Features

In our search for the very best investment HSAs, we looked for administrators that offered a hassle-free investment experience. The HSA Bank HSA is definitely a feature rich offering in that it gives investors all the necessary tools to easily manage their account. The investment platform is easy to navigate, automated account transfers can be instituted and a receipt storage tool is made available to "shoeboxers."

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Feature Available?
Auto-deposit
Investment sweep
Automatic rebalancing
Dividend reinvestment
Receipt storage tool
Easy to navigate
 

Auto-Deposit

HSA Bank offers automatic recurring money transfers from a bank checking account to the HSA checking account.

Automatic Rebalancing

TD Ameritrade does not have an auto-rebalance feature. Investments must be manually rebalanced.

 

Investment Sweep

Auto transfers between the HSA account and TD Ameritrade (TDA) are available. One thing to note is that you must manually invest your HSA dollars once they reach the TDA brokerage account. The implementation of an automatic investing plan would be the only way to have HSA dollars automatically flow into investments on a periodic basis. 

Dividend Reinvestment

TD Ameritrade offers a free dividend reinvestment plan (DRIP). They offer DRIP, free of charge, on most exchange-listed and NASDAQ stocks, ETFs, mutual funds, and ADRs. The stock and ETF DRIP allows you to reinvest your cash dividends or mutual fund distributions by purchasing additional shares or fractional shares.

 

Intuitive Website

HSA Bank makes it easy to manage your investments. The investment page allows you to access the pre-selected investment line-up or the TD Ameritrade self-directed brokerage account. TD Ameritrade has an easy-to-use platform. 

Receipt Storage Tool

Expense Tracker helps you organize and store your healthcare receipts, medical claims, premiums, and other important documents in one place. You can take a picture of the documents from your mobile device or scan them with a printer or scanner.

 
 
 

Pros & Cons

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Pros

1. Reasonable fees

2. Access to a whole array of investment options

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Cons

1. Must be comfortable managing your own investments

2. Few low-cost index offerings in the new TD Ameritrade commission-free ETF list

3. $1.000 investment threshold

 
 

 

An HSA Bank HSA may be right for you if:

  • You are happy with the investment options in the commission-free ETF lineup

  • You desire an online receipt storage tool

  • You are also planning on spending some of those HSA dollars. HSA Bank is on our short list of the best HSAs for spenders.

 
 

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