The Best Health Savings Account – An HSA Redux

I left my old job in mid 2015. That was a grand moment. As the year came to a close, I enjoyed the last few remaining winter months happily unemployed and free. Then, in March, I went back to work.

Anyway, that doesn’t matter. This story isn’t about work. Instead, it’s all about a little HSA account I adopted way back in 2013, and its now rather imminently impending replacement.

Each of the three years I maxed out at $3,300. Picking the fund itself was the fun part. It was interesting covering an introduction to fundamental analysis, dabbling in comparative technical analysis, and finally reaching a soundly founded conclusion. Or so I thought.

Tracking the S&P500 quite nicely!

Tracking the S&P500 quite nicely!

The un-fun part was watching what I thought was a solid, S&P-tracking but actively managed 1% fee mutual fund tumble and then crater in what must have only been a series of terrible mismanagement pitfalls. The disruption to ACMVX broke years of solid, top 500 market index tracking trends that it had managed to display.

It dropped some, but then …

Divergence in motion

Divergence in motion

22 percent?! What happened? How did this fund manage to deviate so horrifically at the end of each holding year-end? Did midcap stocks get killed in comparison to small and large companies? No, they actually exceeded S&P500 performance. (I added ^MID, IWR, and VIMSX to compare other midcap trackers.)

The ACMVX prospectus states that the fund invests 80% in midcaps sourced from the Russell 3000, excluding the top 100 companies (which obviously are not midcap). Perhaps that other 20% was simply frittered away on bad investment ideas. Seems likely!

Everyone's happily tracking …

Everyone’s happily tracking …

Until they're not

Until they’re not

Perhaps another one of the funds so carefully analyzed on that fateful June 3rd day would have been a better choice. Actually even after a new batch of investment options were added they’re all still horrible. So this HSA Admin topic now deserves another look.

The HSA providers I researched all seem to have fees. But these two stood out:

  1. Alliant Credit Union charges no fees and offers “[$5.95 monthly fee] investment options available for accounts with balances above $1,000,” and the investment option list includes VTSAX. Otherwise the annual percentage yield on cash accounts is 0.65%. Seems straight-forward!
  2. HSA Bank charges a combined $5.50 in monthly fees unless the average “bank account” balance is above about $5,000. (Detail of how that number is determined is discussed in the fees schedule.) I am unsure if this “bank account” language means the funds held in cash, or also the cash sum lumped together with the present worth of investment holdings. The Bogleheads HSA Wiki specifies the “minimum balance must be maintained in cash.” Per the footnotes on the TD Ameritrade investing options page, it does mention the HSA Bank and TD accounts are considered separately, so there’s likely going to be a fee. The TD fee schedule document is unavailable to me at the time of this post; according to the Bogleheads Wiki TD offers “commission-free trades on over 100 ETF’s (including Vanguard).” I’ll take their word for it. My 2 years worth of HSA investments are presently above the $5k limit, however they would certainly dip into fee territory during a total market downturn. This fee is less than Alliant, but there’s the pretty good possibility that TD will charge fees on their investments offerings, and then there’s the ETF fees—admittedly small with the Vanguard options. The annual percentage yield at my level is 0.20%, not so great. All these fees remind me of my current HSA administrator. The upside is that TD does include some index ETFs.

With how destructive fees can be I’m looking at the first two options. Moving my current HSA balance over to Alliant, which has no minimums to worry about, simply earns 0.65% APY. A big downside to this choice is that investments will cease to be an option, forfeiting the opportunity to grow the balance. (It’s actually more a chance to escape the crushing effects of inevitable inflation.)

Therein lies a huge indicator that I should seriously consider HSA Bank, which offers low-fee investments in a passively managed index fund. This is simple path. Although it is subject to a $5.50 monthly fee, the access it gives to no-load Vanguard Index funds is the ultimate decider.

Alliant would be a contender, but their investment fee policy is shady. Although Vanguard Total Stock Market shares are available for both Investor and Admiral class there’s a $20 Account Service Fee for “for certain fund account balances below $10,000.” Here’s the Vanguard Total Stock Mkt Idx Adm Summary Prospectus. Is this the standard nudging from Vanguard to opt-in to electronic statements? This isn’t made clear. At $5.95 the monthly account fee is higher than HSA Bank anyway. This further depresses my opinion of Alliant as an HSA Custodian.

Which is too bad, but I did have high hopes for them. A few months ago I opened a couple of accounts through their website. They offer something like 1% APY in their Savings account, with no fees or minimums applicable to the Savings and Checking products. They also threw in a $50 “dividend” incentive!

Finally, an awfully chilling long-range fee expense calculation available on the fund Morningstar reports:

ACMVX Projection

ACMVX Projection

VTSAX Projection

VTSAX Projection

A savings of $1170. Wowww! That is the best motivator to move RIGHT NOW that I’ve found. However I’ll be postponing any roll over action until the end of December. This will give year-end dividends and capital gains the time needed to pay distributions.

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