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.
Elements Financial, formerly Eli Lilly Federal Credit Union (Elfcu), offers a similar setup with TD Ameritrade as HSA Bank. You don’t have to work for Eli Lilly. You can join Elements Financial by making a one-time $5 donation to a non-profit organization called Tru Direction.
Elements waives the $3 monthly fee if you keep $2,500 in the savings account earning 1%. You can invest the rest via TD Ameritrade. TD Ameritrade doesn’t charge any maintenance fees*. You can invest in anything normally available through TD Ameritrade at its normal commission schedule. Take a look at 101 commission-free ETFs, 32 of which are from Vanguard.
For a complete walk-through of setting up the HSA at Elements Financial, see Setting Up HSA at Elements Financial.
* 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 under the Elements contract.
[Update: Elements now charges $24 for each transfer to TD Ameritrade. It’s better to limit such transfers to no more than once a year. See follow-up post Elements HSA Still The Best Despite New Wire Transfer Fee.]
Saturna Brokerage Services
Saturna Brokerage Services offers an HSA in a brokerage account. You can buy pretty much any mutual fund or ETF for $15 a trade, including Fidelity Spartan index funds. Vanguard mutual funds allegedly cost $10 extra. If you contribute the maximum once a year and do one trade, that’s all you pay.
See this review on the Bogleheads forum for more details.
Transfer or Rollover
If you are interested in moving your existing HSA to any of these three providers, you can do it either as a transfer or as a rollover.
A transfer doesn’t pass through you. There is no frequency limit on transfers. 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.
[Last updated on May 8, 2014. Older comments are for the previous version of this article first published in 2011.]
[Photo credit: Flickr user 401(K) 2013]
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