As companies and their benefits brokers gear up for open enrollment, they tend to focus on the changes they want to make to their medical, dental and pharmaceutical insurance. Upgrading the company’s flexible benefit accounts like Health Savings Accounts (HSAs) can get put on the back burner while the core benefits get sorted out. And we get it. Without a High Deductible Health Plan (HDHP), you can’t have an HSA. 

But if you don’t get to switching your HSA during your open enrollment planning, it doesn’t mean you’re stuck with your current HSA administrator for the rest of the plan year. In fact, it could even be beneficial to move your HSA off-cycle as it gives you more time to find the right HSA for your company and complete the fund transfer correctly.

What makes HSAs so flexible

It’s a common misconception that all of a company’s benefits must be locked in during open enrollment. For certain benefits, like the health insurance plans and Flexible Spending Accounts (FSAs), this is true. But since HSAs function a little differently, companies and employees have more flexibility in terms of the changes they can make throughout the year.

For starters, HSAs are employee-owned. That means that once the employee opens and contributes to an HSA, they retain access to that money regardless of where they work or whether or not they are currently covered by an HDHP. Employees must have HDHP coverage in order to contribute to their account, but they can always use their previously made contributions regardless of their active health coverage.

In addition, employees can change the amount they want to contribute (or stop contributions altogether) to their HSA at any time. They can also open an HSA at any time during the plan year as long as they meet the eligibility criteria. All contributions employees make roll over from year-to-year so that there’s no pressure to spend their entire balance throughout the year and they can build a medical expense nest egg.

HSA balances can also be transferred to a different HSA provider at any time (through a trustee-to-trustee transfer), as many times as the employee or employer chooses to do it. HSA balances can also be rolled over to new HSA administrators once every 12 months. This gives employers the flexibility and time to research their options when it comes to HSA administrators to find the best plan for their company.

Why you might choose to move your HSA off-cycle

Preparing for open enrollment can be intense for HR departments. Developing the benefits strategy, reviewing current offerings, reviewing budgets, pairing benefits with talent initiatives– there is a lot of behind-the-scenes work that occurs before the fall. By using this time to focus on developing their strategies and on making changes to time-sensitive benefits choices can help benefits professionals to make better decisions. Because there are fewer decisions they have to make.

Then, once the rush of open enrollment is over, benefits leaders can review their options for flexible benefits like HSAs. They will have the time to demo different platforms and review investment plans so that they’re giving their employees the best HSA plan for them.

In addition to having more time to make more thoughtful decisions around the HSA they’re offering, the employee education they distribute about the new HSA plan and its features is less likely to get lost in the deluge of material employees have to process during open enrollment. Information about investing their HSA contributions is more likely to be considered as well as different contribution strategies (like putting a portion of their bonus in their account).

Additionally, if your current HSA provider doesn’t allow you to transfer employees’ HSAs in bulk to a new provider, employees will have to transfer their accounts individually. Being able to do so at a time when they’re being asked to do fewer HR-and-benefits related tasks can help ensure they do complete the transfer or rollover correctly and don’t end up owing more in income taxes (more on this later).

What happens once you move your HSA off-cycle

When an employer moves their HSA to a new administrator, this can happen in two ways:

1. The employer asks their current HSA provider to transfer their employees’ HSA balances to a new provider in bulk. They can do this via wire transfer, ACH or a bulk check. Once the funds are received, they are deposited into employees’ new accounts and are available same-day. 

2. The employer can open a new HSA and leave it up to the employees to decide whether or not they want to roll over or complete a trustee-to-trustee transfer of their accounts to the new HSA provider, or whether they want to maintain two separate accounts. 

The annual HSA contribution limit for account holders remains the same, regardless of how many individual HSAs employees have and when the HSAs are moved. The new HSA account would be the one into which the employer is depositing contributions from employees’ paychecks and depositing their own contributions. But employees retain access to previously made contributions in the old HSA. If the employer doesn’t move employees’ HSAs in a bulk transfer, individual employees can choose to maintain the two separate accounts or to roll over or transfer their balance from the old HSA to the new one.

How to move your HSA off-cycle

The process to move employees’ HSAs off-cycle typically takes about 30 days. Employers that wish to do this, should follow the steps required by their new HSA administrator. Below are the steps an employer would complete if they were moving their employees’ accounts to Lively.

1. Create the company’s sign-in credentials.

2. Enroll the company in Lively’s HSA by providing eligibility, company, administration and HDHP information, in addition to completing the Due Diligence screening. 

3. Integrate LIvely’s HSA with the company’s payroll provider to make HSA contribution setup and processing more efficient.

4. Setup a call with a Customer Success representative to arrange for a bulk transfer (if completing) and to answer any other last minute questions.

5. Finalize and manage HSA from Lively’s online dashboard. 

6. Add employees.

7. Onboard and educate employees. Lively can do the heavy lifting here. With our extensive library of resources and onboarding tools, employees will be set up to get the most out of their accounts.

If employees will be required to transfer their accounts individually, they can do it in one of two ways:

1. A trustee-to-trustee transfer. This is when the old HSA provider sends the employee’s account balance directly to the new HSA provider. An employee can complete this process by asking the new HSA provider for a trustee-to-trustee transfer form, completing it and submitting it to the old HSA provider.

2. An HSA rollover. This is when the old HSA provider sends the account balance to the employee personally in the form of a check or transfer into their personal bank account. The employee then has 60 days to deposit the money into their new HSA or else it will be treated as a taxable distribution and subject not only to income tax but also the 20% tax penalty.

How Lively can help

Lively is dedicated to supporting employers and employees in providing quality flexible benefits and using those benefits to save and pay for needed medical expenses and retirement. Our customer success advocates can help walk employers through how to complete bulk transfers so employees don’t need to worry about switching their current balance to Lively. 

Or, if your current HSA provider is unable or unwilling to participate in a bulk transfer, we can support employees in completing their trustee-to-trustee transfers and rollovers so that all of their HSA money is in one place and easy to manage. The transfer and rollover process at Lively is paperless and automatic in order to make the transition as easy as possible for benefits administrators and account holders. 

If you’re ready to uplevel your HSA, reach out to Lively today.