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 services more than 3 million HSAs and holds more than $9 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 -
 
 

At The HSA Report Card we are big believers in 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 Optum Bank does not offer investors low-cost index funds for 2 major asset classes (foreign developed and emerging markets). 

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

As you can see in the chart below, Optum Bank offers participants some reasonably priced funds when compared to the other 7 administrators with pre-selected investment lineups in our study.

Optum Bank Investment Lineup

 
 
 
 

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 asset based fee structure. Investment accounts are charged 0.03% per month up to a maximum of $10 (which it hits at $33,000). Thus, at the $33,000 mark, the most Optum Bank will charge an investor is $10 per month.  

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.

 

Auto Rebalance

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.

 

Intuitive Website

Optum Bank recently revamped its website and we like the new look. The new Optum Bank website offers users an intuitive user interface and a hassle free digital customer experience. The Optum Bank HSA is fully integrated; a single password is all it takes to access all accounts. Investments are built into the platform, making it easy to access them.

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.

 
 

 

Pros & Cons

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Pros

1. Broad selection of low cost index funds

2. Auto contributions and investment sweep feature enable consumers to automate investments

3. Electronic receipt storage tool

4. Investments are integrated to HSA account. One password to access all accounts.

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Cons

1. Investment lineup lacks low cost international and emerging markets index funds

2. $2,000 investment threshold

3. 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

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

 
 

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