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.
for Optum 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.
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.
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.
At the The HSA Report Card we are big proponents of passive index investing and thus rate highly administrators that offer 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.
The international offerings in the Optum Bank investment lineup are a bit expensive. The rest of the asset classes are reasonably priced.
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.
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.
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:
Every dollar was invested in VTSAX (expense ratio 0.04%)
Annual Maintenance Fee: $33
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.
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.
Pros & Cons
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.