Tell me more ×
Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It's 100% free, no registration required.
up vote 5 down vote favorite

My employer provides a High-deductible health plan with HSA option. One thing I was surprised by was how many fees were associated with the HSA account offered through my employer (the HSA is administered by Chase). Am I free to pick my own HSA bank? Or am I tied to my employer provided HSA bank?

My company does not provide any employer contribution to the HSA, in case that's relevant.

share|improve this question
Please clarify what is meant by "...offered through my employer(Chase)." Is Chase your employer or the bank that your employer uses to handle the HSA account? – Dilip Sarwate Nov 9 '12 at 14:49
This just happened to be covered on the financial ramblings blog today.. financialramblings.com/archives/best-hsa-for-investing – Matt Nov 15 '12 at 2:40

1 Answer

up vote 2 down vote accepted

HSA accounts come with various rules intended to ensure that the pre-tax money you have opted to put into your HSA account is indeed used for appropriate purposes. Most employers don't handle these accounts in-house but contract with a company or bank who offers to take care of the details and the necessary accounting: the money is simply sent to the bank, and it is the bank that is responsible for ensuring that the money is indeed used appropriately. Now, if you say that you want Wells Fargo (to pick another bank as an example) to handle your HSA account, the employer will likely need to have a contract with Wells Fargo too, and Wells Fargo will charge you fees to handle the account also. Whether you will be any happier with Wells Fargo's fees for a one-off HSA account versus Chase's fees where a (smaller) bulk rate might be charged is something that you should find out before approaching your employer with a request to have Wells Fargo handle your HSA account.

share|improve this answer
1  
My employer allows us to use any bank for our HSA account, so depending on the system through which payroll is sent directly to the HSA account, the employer doesn't need to have a contract with the bank that handles the account. – Mike Partridge Nov 9 '12 at 18:33
Thanks Dilip. That's a valid point. On that note, if I'd rather just open a separate HSA on the side and make direct contributions to it, is that possible? Thereby avoiding the headache of involving my employer. And if it is, are these contributions still eligible to be considered pre-tax contributions (via some tax time deduction)? – Matt Nov 9 '12 at 21:40
2  
@Matt - You still get to deduct the HSA contributions for your federal income taxes and probably your state income taxes. But you'll be missing out on FICA tax savings if you make the HSA contributions yourself. This is because HSA contributions are not subject to FICA taxes as long as they are made through an employer's Section 125 or cafeteria plan. – Greg Nov 9 '12 at 22:21
2  
@Matt As Greg says, the employee can contribute to a HSA plan and gets to deduct the amount in computing the Adjusted Gross income (AGI) on Federal Form 1040. If state or local taxes start from Federal AGI and do not add back the HSA deduction, state and local taxes are saved too, but FICA taxes have to be paid. If the employer makes the deposit into the HSA account, FICA taxes are saved too. So, if your employer refuses to send HSA money to your pet bank and so you put in the money, you need to compare Chase's fees to your bank's fees plus FICA tax to see if you still come out ahead. – Dilip Sarwate Nov 10 '12 at 4:07

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.