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.
for HSA Bank as an investment vehicle
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 no investment threshold requirement. HSA Bank is one of six administrators in our study that allows first dollar investing.
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 21 mutual funds with 15 different fund families represented. The lineup is full of expensive actively managed funds. The combination of high expense ratios and lack of index fund offerings for several major asset classes leave a lot to be desired in the HSA Bank pre-selected investment lineup.
The table below displays the number of funds offered for each asset class in the HSA Bank investment lineup.
There's no secret that we here at the The HSA Report Card are big proponents of passive index investing. Thus, 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 does not offer low cost index funds for 4 major asset classes (domestic mid cap, foreign developed, emerging markets and fixed income). In fact, of the 21 funds offered in the HSA Bank investment lineup, only 3 are index funds. Those 3 index funds are all domestic equity offerings.
How expensive are the funds in the HSA Bank investment lineup?
HSA Bank offers its participants a lot of very expensive funds. Of the 7 HSA administrators in our study that offer pre-selected investment lineups, the HSA Bank lineup is the least attractive in our opinion due to the high expense ratios and exclusion of low cost index funds for several major asset classes.
It's important to note that 3 of the HSA administrators (Saturna Capital, Lively, and Bank of Cashton) in our study do not offer a pre-selected investment lineup. They only offer self-directed brokerage accounts, thus were not included in the analysis. A few administrators (HSA Bank and SelectAccount) offer a pre-selected investment lineup and a self-directed brokerage account.
TD Ameritrade Self-Directed Brokerage Account
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.
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).
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.
Fees & Commissions
In our study of the top 10 investment HSAs, HSA Bank ranks in the middle of the pack when it comes to fees. HSA Bank charges its participants fixed fees, which is something we at The HSA Report Card view favorably.
HSA Bank participants can evade the maintenance fee 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.
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.
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.
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:
All assets were invested in SPTM ETF (expense ratio 0.03%)
SPTM is a commission-free ETF. No transactions costs incurred.
Annual Investment Fee: $36
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.
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 for "shoeboxers."
HSA Bank offers automatic recurring money transfers from a bank checking account to the HSA checking account.
TD Ameritrade does not have an auto-rebalance feature. Investments must be manually rebalanced.
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.
TD Ameritrade does offer 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.
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
1. First dollar investing
2. Reasonable fees
3. Access to a whole array of investment options
1. Must be comfortable managing your own investments
2. Few low-cost index offerings in the new TD Ameritrade commission-free ETF list
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 desire first dollar investing
You are also planning on spending some of those HSA dollars. HSA Bank is on our short list of the best HSAs for spenders.
Other Investor HSA Guides
The HSA Report Card Blog