Whether you’ve just decided to add a Health Savings Account (HSA) to your benefits package, or you already have or offer this type of account but you’re curious about how other HSA administrators work, this is the guide for you. Not all HSAs and HSA platforms and administrators are the same. They can have different features and functionality, and wildly different user experiences.
Since employee engagement can be positively or negatively impacted by their satisfaction with company benefits, and since benefits that are highly utilized are going to have a higher positive impact on employee satisfaction, you want to select an HSA and an HSA administrator that’s popular among its users. You want to look for an HSA that is easy to use and administer, a plan that meets your personal or your company’s needs, and one that offers easy to use, flexible features and low fees. This guide can help you find that HSA.
Understanding HSAs
If you’re still familiarizing yourself with HSAs, how they function and the benefits to offering them, read through this section. We’ll walk you through the basics. If you’re well-versed in the ins and outs of HSAs, skip to the “Key Features” section.
What is an HSA
An HSA is an account into which employers and individuals can deposit money, tax-free, to pay for eligible expenses. Employee contributions can be deducted from their taxable income (so they’re tax-free in the year they’re made), they grow tax-free and as long as distributions are made for eligible expenses, and distributions are tax-free as well. Employer contributions to HSAs are tax-free to the employee and tax-deductible as a business expense to the employer.
In order to contribute to an HSA, it must be paired with a High Deductible Health Plan (HDHP). Traditionally employers pair these to give employees a way to save and pay for the higher out-of-pocket expenses associated with these types of health plans. HSA money can be used to pay for copays, deductibles, coinsurance requirements, prescriptions, dental and eye care, and more. Lively maintains a complete list of HSA-approved expenses.
The IRS imposes a contribution limit for HSAs annually and the limit is based on the type of health insurance plan the account holder is covered by at the time. If the account holder is covered by an individual HDHP, they can contribute up to the limit for individuals for that year. If they are covered by a family HDHP, they can contribute up to the family limit. Regardless of the type of health plan the account holder is covered by, they can always use their contributions to pay for eligible expenses for themselves, their spouse, and any dependents.
The benefits of an HSA
There are many benefits of offering an HSA for employers, employees, and individual account holders.
For the employer, adding an HSA to your benefits package can:
Help you lower your health insurance budget. Since HDHPs typically have the lowest annual premiums of the traditional health insurance plans, offering an HSA will incentivize employees to take this more affordable option, lowering your monthly premium costs.
Help you save money on your FICA (Federal Insurance Contributions Act) responsibility. Both employer and employee HSA contributions made from payroll are FICA tax exempt, so you benefit from tax savings for every contribution. Employee HSA contributions are made before income taxes are assessed, reducing employees’ taxable income. This reduces the amount employers owe for FICA taxes.
Help you improve retention and recruitment efforts. HSAs are popular benefits that help to improve employees’ physical and financial health while reducing financial stress.
Help increase employee productivity. Healthier employees are more productive employees.
Help you to improve compensation packages without increasing salaries across the board. Employees can save up to 35% on their eligible expenses (depending on their tax bracket) by using an HSA and reduce their taxable income for the year while. For example, if an account holder is in the 24% federal income tax bracket, an HSA could save them 24% on federal taxes, 7.65% on payroll taxes, and 3.35% state taxes for a total savings of 35%. In addition, employers can add to the HSA financial benefit by contributing to employees’ accounts.
Help increase employee satisfaction in their benefits. By offering popular benefits that solve real problems employees have, you can increase employee satisfaction in their benefits.
For individual account holders and employees of utilizing an HSA are:
It can help them save money on their medical costs. They can save up to 35% on the medical costs for which they use their HSA contributions (depending on their tax bracket). For example, if an account holder is in the 24% federal income tax bracket, an HSA could save them 24% on federal taxes, 7.65% on payroll taxes, and 3.35% state taxes for a total savings of 35%.
It can help them save money for retirement. HSA balances roll over from year-to-year and once an account holder turns 65, it functions as a traditional retirement account with one exception: any distributions for eligible expenses remain tax-free. The rest of the distributions are taxed at the appropriate income tax rate.
It can help to improve their physical and financial health. By having money to pay for the medical care they need, employees are more likely to seek treatment before a condition gets too bad. They are able to build a health and retirement safety net using their HSA as well.
It can help to ensure their family members are healthier too. Since account holders can use their contributions for eligible expenses incurred for spouses and dependents, even if they’re not covered by the same health insurance, employees’ family members are more likely to receive the care they need as well.
Eligibility criteria for HSAs
In order to be eligible to contribute to an HSA, an account holder must meet the following eligibility criteria:
They must be covered by an HDHP, and that can be their only health insurance coverage.
They must be aged between 18 and 65 years old.
They can’t be considered a dependent on someone else’s tax returns.
They are not enrolled for Medicare or Medicaid.
They or their spouse are not enrolled in another tax-advantaged account that would make them ineligible to participate, such as a general Flexible Spending Account (FSA).
If an account holder fails to meet any of these requirements at any point during their account ownership, they won’t be able to contribute to the HSA. But they can still use previously made contributions to their HSA on eligible expenses, or save the money for retirement. The same rule applies to the employee’s spouse or dependents. The employee can still use their HSA contributions to pay for eligible expenses for their spouse and dependents even if they don’t meet the IRS’s eligibility requirements to contribute to the account. Account holders can also continue to invest their previously made contributions even if they are no longer eligible to contribute to the account.
Key HSA Provider Features to Consider
Not all HSA plans and administrators offer the same features and functionality on their plans. Some popular features like the ability for employees to invest their contributions are only available with certain administrators. Here are the key features you should consider when comparing the different HSA administrators.
Fees and expenses
There are a variety of ways that HSA providers charge fees. Common fee structures often include:
A per account fee
Monthly administration fee (this can be charged to the employer and to the employees’ accounts)
Flat monthly or annual investment management fee
An investment management fee that is charged as a percentage of the portfolio assets
Sign-up fees
As a general rule, the higher the fees your HSA administrator charges, the harder it will be for your employees to build their savings and the more expensive it will be for your company to offer the benefit. Investment fees can be especially detrimental to your employees’ attempts to save, reducing their incentive to use the benefit. So before signing on with an HSA administrator, make sure to review their fee schedule and ask if there are any ways to reduce it.
Investment options and returns
HSA account holders that invest their contributions have a higher average account balance than those that keep all of their money in a savings account. It’s also a popular feature amongst HSA account holders. So if a company's goals in offering an HSA include improved employee financial health and improved employee satisfaction with their benefits, offering an HSA that has investment options can help you achieve these goals.
But once again, not all HSAs are created equal, even those that offer investing capabilities. You’ll want to make sure the HSA administrator offers a range of investment types, and two different investing plans: a guided option and a self-directed option. That way employees that are new to investing or don’t have the time or desire to research individual investments can participate, as well as employees that desire more direct control over their investments.
You’ll also want to review the fee structure and try to pick a provider that has little to no fee to invest as well one that does not require a high balance to invest. High fees for investment accounts can eat into employees’ savings and negatively impact how fast they’re able to grow their account balance.
User experience and accessibility
If the HSA is too difficult for account holders to use, they won’t engage with it. And if they don’t engage with it, they won’t realize the benefits of contributing to and using an HSA. If the HSA is too onerous to administer, it will be costly to the company in terms of the number of hours a company’sHR team will spend just keeping the benefit active and compliant.
You want to look for an HSA administrator that offers a clean user interface for both the employee and employer. There should be a dashboard that offers only the important information in a clear and usable way, they should offer a mobile app, a debit card, quick and easy onboarding and customer service, and tools that help users utilize the benefit easier. In short, even employees that are the least technical should be able to navigate the user interface and manage their account.
Additional services
Responsive customer service is essential when choosing an HSA provider. Even if the HSA platform is easy and intuitive, both the HR team and employees are bound to have questions. Whether they’re experiencing technical issues, have onboarding questions, or there’s something else they need help with, you want to know the issue will be resolved quickly. Look for an HSA administrator with a fast issue resolution rate, and one that wins repeated awards for customer success and customer service.
The only factor that makes a well-run and designed HSA platform even better is the ability for companies to offer additional benefits through the same platform. If you’re interested in crafting a benefits package that helps solve the problems employees have from different angles like Lifestyle Spending Accounts (LSAs), commuter benefits, and more, you’ll want to look for an HSA administrator that offers it all.
Top HSA Providers of 2024
1. Lively
Lively is a top-rated, modern HSA, built for easy set up, use, and management. With a customer-first design, the Lively HSA offers a mobile app, debit card, and a clean and clear dashboard that gives both benefits administrators and employees all the information they need.
Lively offers state-of-the art features to help account holders easily pull in claims from their health providers, scout expenses on their personal card, and easily identify eligible expenses at the snap of a photo through our mobile app.
Lively’s investment offerings can be customized for different types of investors and there is no minimum balance requirement. They include a Guided Portfolio which allocates their money based on their answers to a short survey, or a Self-Directed investment account that allows account holders control over the individual investments they purchase.
Lively has a low fees and transparent pricing so that account holders can save more of their money and companies can help contain the cost of administering benefits. Lively also offers ongoing account holder education, employer and employee onboarding support, and has a top-rated customer service team with customer satisfaction scores over three times the industry average.
For employers, Lively also offers a complete suite of flexible benefits, including Lifestyle Spending Accounts, Flexible Spending Accounts, HRAs, commuter benefits, and COBRA, that you can use to craft the most impactful benefits package for your employees, all administered through the same platform.
Benefits of a Lively HSA:
Account balances 39% higher than industry average.
Customer satisfaction 4 times the industry average.
Easy-to-use platform that simplifies benefit administration.
Transparent fee structure
Lower cost benefit administration.
Faster issue resolution.
Integrations with payroll and benefits administration software.
2. Fidelity
Fidelity is a well-known financial services company that offers a broad range of wealth management tools including HSAs, retirement savings accounts, personal investing, college savings accounts, life insurance, and more. They offer a low-cost HSA with a wide range of investment options, a well-designed platform and integration with other Fidelity accounts.
Features include:
No minimum balance required to open an HSA or to invest contributions.
HSA plan administration can be integrated with other Fidelity benefits like life insurance and retirement savings accounts.
Transparent and low fee structure.
They offer two different types of investment accounts: Self-Directed and Managed.
3. HealthEquity
HealthEquity is the largest flexible benefit administrator in the U.S. It offers a range of benefits solutions like HSAs, Flexible Spending Accounts (FSAs), COBRA, and more. They offer a variety of investment options and a clear, user-friendly interface. HealthEquity also offers businesses different programs to help them drive employee adoption of the offered benefits. On the other hand, HealthEquity also charges annual and monthly investment fees, depending on the type of account you choose. Savings accounts at HealthEquity earn minimal interest unless they accumulate a large balance.
Features include:
Ability to bundle a suite of flexible benefits.
Custom integrations.
Extensive resource library.
Transparent fee structure.
Diverse investment options.
4. Optum HSA
Optum HSA is affiliated with United Healthcare and offers health care as well as an HSA solution. If you are offering health insurance plans through United Healthcare or you want to offer an insurance option through Optum, the administration of its HSA can be integrated with the administration of those health plans. Optum offers a suite of flexible benefits options that companies can bundle to craft an impactful benefits package. Optum also offers a diverse menu of investment options but account holders are required to maintain a minimum balance in their HSA in order to invest funds.
Features include:
Employees can choose from over 25 different mutual funds in which to invest their HSA contributions or a robo-managed account through Betterment.
Mobile app.
Debit card.
Easy integration with an in-house health insurance and pharmacy plan.
Extensive educational resources.
5. HSA Bank
HSA Bank offers a customized HSA solution for the employer and personalized experience for the account holder. They have an intuitive user interface and a wide range of flexible benefit solutions employers can bundle together for easy administration. They also have a well-designed mobile app that eases account administration and mobile payments on-the-go. The downside to HSA Bank is their APY structure. In order to earn the highest APY on the contributions kept in savings accounts, account holders have to have a balance of at least $50,000.
Features include:
Well designed mobile app.
No investment minimums.
Debit card that can be linked with your digital wallet.
No monthly account fees as long as account holders opt for digital statements (i.e. no paper statements).
6. Bank of America HSA
Bank of America is a well-known bank that offers an HSA alongside typical banking accounts. For employees that already bank at Bank of America, the seamless integration of this HSA with their other banking activities can make it an easy account to manage and participate in. Account holders that wish to invest their contributions have a wide range of mutual funds to choose from. Account holders that wish to save their contributions in savings accounts will earn interest based on a tiered system. They must save at least $10,000 in order to earn the highest APY of 0.7%. All savings accounts come with a monthly fee and investment accounts can be3 subject to management fees (employees should check their individual plan documents).
Features include:
Integration with other Bank of America accounts.
Lots of investment options to choose from.
No minimum to open an account.
Debit card.
Mobile app.
Can easily find a branch to get help in person if needed.
7. WEX HSA
WEX purchased Discover Benefits in 2019 and rebranded all of the benefit plans. They offer online customer support, multiple benefit accounts integrated into one debit card and employee self-service via an online portal.
Features include:
Mobile app.
Debit card.
Multiple benefit options that can be bundled.
8. Inspira Financial
Millenium Trust Company and PayFlex have rebranded to form Inspira Financial. Millennium Trust Company was originally an IRA administrator but has expanded their benefits offerings by purchasing smaller benefit administrators including: PayFlex, BenefitResource Inc., ProFlex and Marpai. They are affiliated with Aetna and as such their flexible benefit account management can be integrated with the management of Aetna health insurance plans. Account holders must reach a high minimum balance ($1,000) before they can invest their contributions but once they do, the platform allows them direct control over which investments they want to purchase.
Features include:
Mobile app.
Debit card.
Multiple benefit options that can be bundled.
Account holders have control over the individual investments that are purchased.
9. UMB Bank
HSA Authority has been rebranded under UMB Bank. UMB Bank is a financial institution that offers a wide range of financial services like checking and savings accounts, mortgages, etc. If employees bank with UMB Bank they can manage their HSA alongside their other accounts. UMB Bank offers HSA account holders a wide range of investment options from mutual funds to individual brokerage choices. They are focused on keeping their benefit administration platforms innovative and in personalizing customer service.
Features include:
Debit card.
Mobile app.
Integration with other UMB accounts including commercial banking.
A wide range of investment options.
Personalized customer service.
10. Benefit Wallet
Benefit Wallet offers users a simple and easy-to-use interface and integrates well with Medical Mutual health insurance plans. They provide employees with lots of educational resources and make it easy for them to manage contributions to their account and make direct payments. They also offer employers robust reporting features.
Features include:
Extensive library of resources for account holders.
Integration with Medical Mutual health insurance plan administration.
Simple, easy-to-use user interface.
Debit card.
Mobile app.
Strategies for Maximizing Your HSA
Investing your HSA funds
The best way to grow your HSA balance is to invest your contributions. In 2023, Devenir found that the average balance of an HSA with at least a portion of its contributions invested was $19,212 which was 7.6x larger than the average balance of an HSA that didn’t have a portion of its money invested. So if your HSA allows you to invest at least a portion of your funds, and you don’t have any immediate needs for that money, it’s an option you should consider.
If you’re not familiar with investing money in the market, you can look for an investment plan that utilizes mutual funds and is automatically managed or readjusted based on your answers to a survey. If you’re already an avid investor or just want the ability to have direct control over the investments your contributions are used to purchase, you’ll want to look for a plan that has direct brokerage options (Lively has both!).
You also want to review the fee structure for your chosen plan. Even a small monthly fee can eat into your savings growth over time (due to compound interest). Funds that are robo-managed tend to have lower fees associated with account management than those that are actively managed.
Managing healthcare costs with an HSA
As sure as the sun will rise in the east and set in the west, your healthcare costs are only going to go up. And crossing your fingers and hoping that you don’t experience a health emergency isn’t an effective financial plan. But contributing to an HSA is. This is why:
HSA contributions are inherently pre tax, so you can save up to 35% (depending on your tax bracket) on the retail cost of your eligible expenses as well as lower your taxable income for the year.
Your HSA balances roll over from year-to-year, so if you can save more than you spend, you can build a nest egg for that medical rainy day.
HSAs are individual accounts which means that even if you leave your employer, you continue to keep your HSA with you over time and you won’t lose the money contributed just because you leave your employer, like you might with a Flexible Spending Account (FSA) or Health Reimbursement Arrangement (HRA).
Once you hit age 65, your HSA begins to function like a traditional retirement account with one caveat: distributions for eligible expenses remain tax free. And since the average couple retiring today can expect to spend roughly $300,000 on medical expenses in retirement, saving income taxes on this amount could result in significant cost savings.
If you invest your contributions, they will grow at the rate of the market, enabling you to save more money, faster to help manage the rising medical costs.
Choose the Right HSA Provider for You
The right HSA provider for you is the HSA provider that offers the features you need, for a fee structure that makes sense for the employer’s budget and allows the employee to keep as much of their savings as possible. Beyond attractive features like reporting and investing capabilities, you’ll want to make sure their current customers are happy with the customer service they receive, the user interface and how easy it is for employees to independently engage with their account.
If you want to get started with a top-rated, easy-to-use HSA that's free for individuals and includes expert customer service, sign up for Lively today. If you are an employer or benefits broker and want to discuss adding a hassle-free, top-rated HSA to your benefits package, reach out to us today.