When I first started my Health Savings Account (HSA) two years ago, I decided to just use the savings account at Alliant Credit Union. At that time Alliant Credit Union’s HSA was paying 2% interest, which was comparable to the yield on a short-term bond fund. Because money is fungible, I just moved some money from short-term bonds to stocks elsewhere in my investment portfolio. That was as if I invested my 100% of my HSA in stocks.
As time passed, the interest rate on Alliant Credit Union’s HSA dropped from 2% to 1.25%, then to 0.65%. My HSA balance also grew. Now it’s time to look again.
HSA Bank is a popular HSA provider. If you keep $5,000 in cash earning 0.3%, you get the maintenance fees waived and you can invest the rest of your money at TD Ameritrade. If you want to invest the whole thing, you pay $66 a year in maintenance fees.
That’s not too bad.
Eli Lilly Federal Credit Union
Reader Adam asked me a question on my HSA rollover article. He indirectly pointed me to the best HSA provider for investing HSA money: Eli Lilly Federal Credit Union (Elfcu). You don’t have to work for Eli Lilly. You can join Elfcu by making a one-time $5 donation to a non-profit organization called Tru Direction. I already became a member of Tru Direction when I opened my reward checking account with a different credit union.
Elfcu doesn’t charge any setup fee or maintenance fee. You can invest 100% of your money via TD Ameritrade once you have at least $2,500. You are not required to leave any money behind at Elfcu; if you choose to do so, you earn 1%, which is about the best you can get these days for a savings account. TD Ameritrade also doesn’t charge any maintenance fees*. You can invest in 101 commission-free ETFs, 32 of which are from Vanguard, in addition to other investments normally available through TD Ameritrade.
Elfcu offers a better HSA than HSA Bank. If you leave money in the savings account, the interest rate is higher (1% vs 0.3%). If you invest the whole thing, you don’t pay the $66 maintenance fees HSA Bank charges.
Transfer or Rollover
If you are interested in moving your HSA to Elfcu, you can do it either as a transfer or as a rollover.
A transfer doesn’t pass through you. There is no limit on transfers. Just fill out this HSA transfer form and send it to Elfcu. Your current provider may charge you a fee for the outgoing transfer. Not all HSA providers charge, for instance Alliant Credit Union doesn’t.
If your current provider charges a fee for the transfer and you want to avoid it, you can do a rollover yourself, but you can only do it once per rolling one-year period (not calendar year). See How To Rollover an HSA On Your Own and Avoid Trustee Transfer Fee.
Update: For a complete walk-through of setting up the HSA at Elfcu, see Setting Up HSA at Eli Lilly Federal Credit Union.
* There’s some confusion about whether TD Ameritrade charges $12.50 per quarter as maintenance fee, which appeared in a disclosure document. When I called TD Ameritrade, the rep from Participant Services told me TD Ameritrade doesn’t charge.
[Completely rewritten on Jan. 20, 2014. Older comments are for the previous version of this article first published in 2011.]
[Photo credit: Flickr user 401(K) 2013]