The HSA Report Card

Optum Bank

Optum Bank

 

Optum Bank started operating on July 21, 2003, in Salt Lake City, Utah, as a Utah state-chartered industrial loan corporation. Optum Bank is part of the financial services unit of Optum, a health and wellness company serving more than 115 million people. Optum is part of the United Health Group (NYSE:UNH) family of companies. Optum Bank has more than 3 million HSAs and more than $7 billion in assets, making it one of the largest administrators in the industry.

 
 

Report Card

for Optum 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. 

The investment threshold for an Optum Bank HSA varies from $0 - $2,000 if you are part of an employer group plan. For individuals and families enrolling on their own, the investment threshold is $2,000.

 
 

 
 

Investment Account

 

The Optum Bank investment lineup is composed of 31 mutual funds with 11 different fund families represented. In the chart below you can see the number of offerings from each fund family.

 
 

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

 
 
Asset Class # of Funds Offered Index Fund Available?
Domestic Large Cap 6 Yes
Domestic Mid Cap 3 Yes
Domestic Small Cap 2 Yes
Foreign Developed Markets Equity 2 No
Emerging Markets Equity 1 No
Short & Intermediate Term Fixed Income 6 Yes
Target Date/Allocation 9 Yes
Specialty/Other 2 -
 
 

Optum Bank has done a decent job of constructing a diversified investment lineup. Every major asset class is represented. However, Optum Bank could improve the investment lineup by offering low-cost foreign equity and emerging markets index funds. That said, low cost, broadly diversified index funds represent 65% of choices.

Optum Bank Investment Lineup

How Expensive are the Funds in the Optum Bank Investment Lineup?

As you can see in the chart below Optum Bank offers its participants some reasonably priced funds.

 
 
 
 

The international offerings in the Optum Bank investment lineup are a bit expensive. The rest of the asset classes are reasonably priced.


 
 

Fees

 
Condensed Schedule of Fees for Standard Plan (Non-Employer Group)
Type of Fee Fee Details
Maintenance $2.75 per month Free (balance >$3,000)
Investment 0.03% AUM per month Capped at $10 per month
 
 

In our study of the top 10 investment HSAs, Optum Bank ranks as one of the most expensive administrators. Optum Bank charges its investment participants a maintenance fee and an asset based fee. The maintenance fee is reasonable, but the 36 basis point annual asset based fee is steep.

Optum Bank has a unique investment fee structure. Investment accounts are charged 0.03% per month up to a maximum of $10 (which it hits at $33,000). 

Optum Bank participants can evade the maintenance fee by leaving $3,000 in the HSA checking account. Before opting to leave $3,000 in the checking account, take into consideration the opportunity cost of not investing this money.

Optum Bank Fee Schedule

 
 

 

Projected Fees

In this section, we have a little fun projecting fees for each administrator. Our goal was to keep fees as low as possible 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 offering 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 Optum Bank we made the following assumptions:

  1. Every dollar was invested in VTSAX (expense ratio 0.05%)
  2. Annual Maintenance Fee: $33
  3. Annual Custodial Fee: 0.36% (capped at $10 per month)

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

 
 
 
 

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

 
 
 
 

On investment balances from $0 - $15,000, Optum Bank fees are reasonable and in line with those of other top administrators. However, once investment balances reach the $20,000 mark and beyond, the fees are substantially higher than other top HSA administrators. For this reason, Optum Bank earned a poor grade on this measure.

Optum Bank is the 8th lowest cost provider in our study of the top 10 investment HSAs.


 
 

Features

 

In our search for the very best investment HSAs we looked for administrators that offered a hassle-free investment experience. The Optum Bank HSA is definitely a feature rich offering in that it gives investors all the necessary tools to easily manage their  investment account.

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Feature Available?
Auto-Deposit
Investment Sweep
Automatic Rebalancing
Dividend Reinvestment
Receipt Storage Tool
Intuitive Website

Auto-Deposit

With Optum Bank you can schedule recurring deposits from a bank checking account to the HSA checking account.

Investment Sweep

There is a one-way sweep from the Optum Bank HSA checking account to the investment account. This means that you can choose an amount and any time your account exceeds it, funds will be automatically transferred to your investment account. For example, if you choose $2,000 and your balance hits $2,500, $500 will be swept over to your investment account.

Automatic Rebalancing

On the Optum Bank investment platform participants can opt to have their funds automatically rebalanced periodically.

Dividend Reinvestment

Dividends are automatically reinvested by each mutual fund in the investment account.

Receipt Storage Tool

Manage all of your receipts online using Optum Banks electronic document storage system. The online receipt storage tool lets you upload and save images of your receipts for qualified medical expenses.

Intuitive Website

Optum Bank recently revamped its website and we like the new look.

 
 

 
 
 
Pros
  • Broad selection of domestic low-cost index funds
  • Hassle-free automated investment experience
  • Electronic receipt storage tool
Cons
  • Investment lineup lacks low cost international and emerging markets index funds
  • $2,000 investment threshold
  • 0.36% annual investment fee
 

 
 

An Optum Bank HSA may suit you if:

  • You are satisfied with the investment options in the pre-selected lineup
  • You desire an online receipt storage tool
  • You have less than $15,000 in the investment account
 

 

Other In Depth Guides


 

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