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Can You Choose an Alternate HSA vs. Your Employer HSA?

4 min read

30 sec brief

Most healthcare plans are driven by employers. This is often why HSAs are first introduced by your HR benefits manager or office administrator. It is also the reason that HSA adoption is largely driven by employer healthcare options. As healthcare plans have become more expensive, employers have reacted by offering more HSA-eligible healthcare plans, like an HDHP (high deductible health…

Most healthcare plans are driven by employers. This is often why HSAs are first introduced by your HR benefits manager or office administrator. It is also the reason that HSA adoption is largely driven by employer healthcare options. As healthcare plans have become more expensive, employers have reacted by offering more HSA-eligible healthcare plans, like an HDHP (high deductible health plans).

You might not know that even if your employer offers an HSA, you can select your own HSA provider. Why would you consider a different HSA provider than the one supplied by your employer? This answer will vary by employee, but a few reasons include fees, investing options, and of course customer service. Your HSA savings might be tax-free, but the time wasted on-hold waiting to speak to a customer service representative is not!

Employer-Sponsored HSA Details

There are two reasons why you might use your employer HSA. First, it’s easier. So instead of finding the best HSA on the market, you use what is given to you. Seems like a silly decision, right? Second, your employer contributes to your HSA. This is a good reason to stick with your current HSA provider, but let us show you why opening a second HSA, might make sense as well.

Alternate HSA Details

Opening an HSA is based on eligibility, not based on your health insurance provider, employer, or location (as long as you work in the US). As long as you have an HSA-eligible health plan, you can open an HSA. You can also have multiple HSAs as long as you adhere to the yearly contribution limits. Think of an HSA just like a 401(k) or IRA. Having multiple 401(k)s might help you understand your HSA account options.

Alternate HSA Options

With this in mind, here is how you can choose and fund an alternative HSA from your employer-sponsored HSA.

  1. Pre-Tax Contributions – You can still make tax-free payroll contributions into your HSA by providing your employer your HSA account and routing number. This is at no cost to your employer. This allows you to save tax-free dollars for all of those expected and unexpected medical expenses. Check with your employer to see if they are set-up to allow you to take advantage of this.
  2. Tax Deductible Contributions – If your employer is not set-up for this or they won’t route their employer contributions into the HSA of your choosing, you can always just make post-tax contributions directly from your bank account and claim the tax benefit at the end of the year (when you file taxes), instead of on a paycheck by paycheck basis.
  3. Trustee-to-Trustee Transfers – The IRS limits the total number of HSA rollovers to 1 per calendar year. But you can do as many trustee-to-trustee transfers as you’d like. This is often done because you are looking for better or more robust investment options.

Please note Lively has no account balance requirements or investment minimums, so as soon as you transfer any funds, you can get started and put your tax-free HSA funds to work you.

Having the freedom to choose your own path in the healthcare space is unique. Use this to your advantage to select the HSA that fits your needs, not just the HSA selected by your employer.

If you need more help with health account decisions, check out our blog. We will make you a healthcare benefits expert in no time, without any extra work or effort on your end.

Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.

About the author

Lively

We are HSA Experts! Lively is a Health Savings Account (HSA) platform for employers and individuals. A 401(k) for healthcare.

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