Options for HSA with no high deductible plan

Question

I had an employer that offered a high deductible plan with an HSA. I have since moved employers and my new employer does not offer a high deductible plan. At first, I thought I would just keep my HSA until I'm old enough to cash it out without penalty (still 20+ years away) or for when/if a high deductible plan becomes available to me again, but I have discovered that my HSA brokerage charges $3.50 monthly maintenance fees for accounts that do not have active contributions.

• Can I rollover my HSA either to my IRA?
• Can I rollover my HSA to someone else's HSA? What if they are my spouse?
• Can I open an HSA at a new brokerage without maintenance fees? Do such firms exist?
• Are there other options available that I'm not listing here?

I would rather cash out, take the penalties, and have cash in hand than leave the money in the HSA "just-in-case" I have health related expenses before the maintenance fees slowly eat it all away. Is there a better option?

Thanks.

Answer 1

You can open an HSA account with any financial institution that you like, and roll over the money from your current account into the new one. Since you are no longer in a High Deductible Health Plan, you can't contribute any new money into an HSA, but you can still spend the money in your HSA on eligible medical expenses, until it is gone. There are lots of things that you can spend HSA money on, so there is no need to cash out and take on taxes and penalties.

Yes, there are HSA accounts that don't charge ongoing maintenance fees. Check with a local credit union; they usually have no-fee HSA accounts.

Answer 2

You could open an HSA with a company like Vanguard or Fidelity that offers lower fees and roll the money there if you want to avoid the $3.50/month. The chances of you going until retirement without opportunities to spend down the money in that account on medical expenses seems rather low.

Answer 3

You can use it for medical expenses even if you don't have a high deductible policy. It can cover prescriptions, copays, deductibles, co-insurance, dentist, orthodontics...

As long as it is being used for an approved medical expense there is no tax or penalty.

Yes it doesn't save you on the monthly service charges but it does allow you to cut your medical expenses for a while.

Answer 4

Can I open an HSA at a new brokerage without maintenance fees? Do such firms exist?

Yes. https://20somethingfinance.com/best-hsa-account/ (mirror) has a nice table comparing fees between HSA administrators. A few of them do not have any maintenance fees. Current snapshot:

https://www.hsasearch.com/compare has a longer list (currently lists 553 HSA providers).

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To move your money between HSA providers:

From https://medium.com/@livelyme/hsa-rollovers-and-transfers-demystified-a757c9d7fc4e (mirror):

The IRS allows each HSA account holder to “roll over” their funds to a new HSA provider every 12 months and maintain the tax-advantaged status of the HSA.

https://finance.yahoo.com/news/hsa-rollovers-step-step-guide-140838734.html (mirror):

You can make as many trustee-to-trustee transfers as you wish.

https://livelyme.com/rolling-over-your-hsa (mirror):

HSA Trustee-to-Trustee Transfers vs. HSA Rollovers: HSA rollovers are designated as a transfer from a trustee (like a bank, financial institution or HSA provider) to an individual and back to a trustee (like your new bank, financial institution or HSA provider). In contrast, HSA transfers are from trustee to trustee and there is no limit on how often you can do this

Beware of taxes in case you have to liquidate some of your positions as some US states taxes HSA gains: https://medium.com/@livelyme/hsa-rollovers-and-transfers-demystified-a757c9d7fc4e (mirror):

If you have your HSA funds invested in liquid securities (e.g., stocks, bonds, mutual funds, ETFs, etc.), you can inquire about an in-kind transfer. This is when the investment partner where your HSA funds are invested will transfer all your existing positions to the investment partner of your new HSA provider. Be warned that most HSA providers don’t allow for this. For those who don’t allow your funds to be transferred out using an in-kind transfer, unfortunately you will need to liquidate your funds before moving them. This is particularly unfortunate because in certain states (e.g., California), any interest, dividends, realized gain, etc. is considered taxable income and you’ll have to pay state taxes.