Category Archives: Reader Question

How to Avoid Health Savings Account Bank Fees

This question was submitted by HSA Edge reader Lillian. Feel free to send in your question today to evan@hsaedge.com.

I used to have an HSA account through my job but they are not offering that plan anymore, so now I have to pay a fee to keep that account open. Can I transfer that money to another account or another HSA bank where they would not charge me a fee even though my employer doesn’t offer that type of account?


Too many HSA fees

While Health Savings Accounts are a forward thinking way to save money and reduce medical expenses, the banks that provide the actual accounts have not fully caught up with the times. Their offerings suffer from poor web design, lack of tools and features, and restrictive / excessive fees. Even though HSA usage continues to increase at a rapid rate, traditional banks have not yet caught up, and avoiding fees for the HSA owner is an important part of protecting your investment. This article will review some commonly levied fees by one HSA custodian, and discuss 5 ways that you can reduce or eliminate HSA fees in your account.

Research fees structure before opening account

It is surprising how many fees there are related to HSA’s. Not just those specifically relating to your Health Savings Account, but other banking fees thrown in as well. For example, take a look at this screenshot from HSA Bank’s website describing some of their fees:

HSA bank fees

Granted, not all of these fees occur each month, and some of these are legitimate as they support costs for services. I do like how they list strategies on how to avoid the fee. However, as an HSA owner you need to look for recurring or transaction fees that affect your HSA. For example, here are some of the HSA related fees charged by that bank that directly affect HSA owners, some on every transaction!

While this bank is free to offer services they see fit, I hate being charged to access my money, so I see some of these fees as egregious and would shop around.

How to avoid HSA fees

Too many fees can add up and reduce your HSA balance over time. Plus, they are just annoying, since it is your money, and you are being nickel and dimed at every turn. As such here are some strategies to avoid or reduce Health Savings Account fees and charges.

  1. Choose low fee plans – this involves doing a bit of research before you open your HSA. While the timing of opening your HSA is important, it is also important to get the best deal possible. Search around online and talk to your bank / credit union to see what types of plans they offer. Somewhere hidden on their website is the fee schedule that you need to review. Apply those fees to your situation and compare the plans of different providers. This will insure that you are at least aware of the fees charged and can choose what is best for you.
  2. Switch HSA custodians – if you already have a Health Savings Account, you can still compare plans and switch to a new custodian if you find a better deal. This is easily done using an HSA Rollover to move funds between HSA accounts. Yes, you can have more than one HSA open at a time at different providers, and there is no tax or penalty to move HSA dollars between them. The point is you don’t have to stick with the HSA custodian your job set you up with, or the custodian where you first opened your account. Instead, do your fee research, find the best deal for you, and make a move if it makes sense.
  3. Maintain the minimum balance – one of the best parts about HSA’s is you can invest your funds tax free. However, many banks have a minimum amount needed to invest, and others levy fees if you are investing but your investment amount is under a certain minimum. Thus, if you can beef up your HSA and meet those minimums investment amounts, the monthly fees will go away forever. This might involve making an extra contribution or two to your HSA, or waiting to invest it until you have the minimum available. I recommend keeping part of your HSA in cash (not invested) at all times in case you need it for health care. Once you have that amount set aside, you can begin investing the rest.
  4. Choose cheapest options –if you look at the fee schedule above, you can see that they offer recommendations of how to avoid their HSA fees. Use this to your advantage by making choices that reduce fees charged. For example, there are a number of ways to pay for an HSA purchase. At the above bank, the associated fees are:
    • ATM Withdrawal – $2
    • Debit card purchase – $2
    • Manual withdrawal – $10
    • Online transfer – $0

    Thus, it would make the most sense to purchase HSA elgible expenses on your credit card, and do an online transfer from HSA to bank to reimburse the purchase, making it tax deductible. Playing by the bank’s rules can add up and save you a lot of money over time.

  5. Play by the rules –regardless of your bank fees, you want to be familiar with the rules of HSA’s. This will help you avoid taxes and penalties with the IRS as well as your HSA custodian. For example, excess contributions can usually be removed from your HSA before tax day without penalty. However, the HSA custodian above will charge you $25 for the pleasure. In addition, they charge $25 for a transaction correction, which consists of a change to the transaction type, amount, or tax year. By knowing what you can contribute and getting it done correctly the first time, you can avoid this $25 fee.

Note: if you need help reducing HSA bank fees, consider my service TrackHSA.com for your Health Savings Account record keeping. You can store purchases, upload receipts, and record reimbursements securely online. Besides tracking everything important, this will help you batch transactions for reimbursement and prevent mistakes that cost you money.

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Out of Pocket Maximum Too High For HSA?

This question was submitted by HSA Edge reader Kathy. Feel free to send in your question today to evan@hsaedge.com.

Is it possible for maximum out of pocket expenses to be too high to qualify for a Health Savings Account? Mine is $6800. My deductible is the same. This is for a single person.

Yes, it is possible for an insurance plan not to qualify as an HDHP due to to an out of pocket max being too high.

An insurance plan must be considered a High Deductible Health Plan (HDHP) to be HSA eligible. Each year, the IRS publishes their HDHP definitions of what qualifies. The requirements are pretty consistent although amounts vary from year to year due to inflation calculations. You must meet all of the requirements to be HSA eligible, and they traditionally look at the following:

  1. Minimum Deductible – your plan’s deductible must be greater than this amount
  2. Out of Pocket Max – your plan’s out of pocket maximum (the total amount you can spend in 1 year on your plan) must be less than this amount

Once you compare your health insurance to these numbers for a given year, you determine if your insurance is categorized as an HDHP, and if so you are able to open and contribute to a Health Savings Account.

For 2017, that out of pocket maximum is $6,550, so if your plan has an out of pocket max of $6800, it likely does not qualify. I don’t know why the government does this and excludes certain plans. In my mind, they have not adequately adjusted the HDHP definitions in line with out of control insurance costs. In addition, plans offered on the “marketplace” by the Affordable Care Act systematically priced plans out of HSA eligibility using your exact example, setting out of pocket maximums just above the HDHP definition. Hopefully the government rights the ship and opens up HSA’s to more people.

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Note: The IRS requires that you keep receipts for your Health Savings Account purchases. Please consider my service TrackHSA.com for your Health Savings Account record keeping. You can store purchases, upload receipts, and record reimbursements securely online.

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How Much Did I Contribute to My HSA?

This question was submitted by a user of EasyForm8889.com. Feel free to send in your question today to evan@hsaedge.com.

I don’t know where to find the amount I contributed to my HSA. The IRS says I had $774 in my HSA account. My W2 says my employer contributed $850. Does this make sense?

The bad way to determine your HSA contribution

First off, using your bank account, HSA transaction history, or W2 isn’t the way to determine your HSA contributions for a given year. Why is this? While these numbers may often equal the amount you contributed to your HSA, they may not equal what was reported to the IRS as contributed to the HSA. Mistakes happen, and sometimes your HSA administrator will miss a contribution or mess up the dollar amount. If this happens, they will report a different amount than you report on your taxes. This discrepancy can be a red flag to the IRS, which is why it is critical to have a “source of truth” for your HSA contributions. This serves as the official amount contributed to your HSA for the year, and if it is not correct, you can have your custodian fix it fairly easily.

Form 5498-SA reports contributions for the year

Each year, your HSA custodian (bank where you have account) is required to send you IRS Form 5498-SA. This form provides an accounting of all contributions to your HSA for the tax year, including personal, employer, prior year, and rollover contributions. Form 5498-SA is the “source of truth” we describe above, and is the final say in what was contributed. It is basically the “writing in stone” between you, your HSA custodian, and the IRS. Thus, if it is not correct, contact your custodian and make it so.

Here is an example of what Form 5498-SA looks like:

HSA_Form_5498-SA_2016 completed

For more detailed information on Form 5498-SA, please see this article.

Where is my Form 5498-SA?

Your HSA custodian is required to send you this form each year before you file your taxes. Generally, you should get the form by January 31st. However, mail gets lost or sent to wrong addresses. If you do not have your Form 5498-SA, don’t worry, you should be able to find this form on your custodian’s website in the document archive. Worst case, give them a call and ask to resend it or email it to you.

Why HSA Contribution amounts are important

Getting your HSA contribution amount is critical when you go to file Form 8889 each year, as an incorrect value can cost you money. If you under report your contribution to your HSA, you will not receive the tax deducation that Form 8889 allows you (by means of Form 1040). You basically did all the hard work for the HSA and didn’t get any benefit. On the other hand, if you over report your contribution, you risk taking too much of a deduction. This results in filing your taxes wrong and spending time dealing with fixing them or wost case, a friendly chat with the IRS.

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Note: if you need help calculating your contribution on your HSA taxes this year, please consider using my service EasyForm8889.com to complete Form 8889. It is fast and painless, no matter how complicated your HSA situation.


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