If you are following along in the conversation regarding Health Savings Accounts (HSAs) as a mechanism to help your employees enhance their retirement readiness, then keep reading. My most recent post discussed the five things employers should be educating their employees on related to HSAs (if they have a High Deductible Health Plan with an HSA option). This post jumps into the duty to select and monitor HSA service providers and a few tips for what to consider during your selection process.
Unlike many retirement plans that are subject to ERISA, in general, HSAs are not viewed as welfare benefit plans subject to ERISA,[1] which means that the more stringent duties under ERISA for selection and monitoring of your HSA service provider generally would not apply. However, the ERISA exemption that applies to HSAs is very limited and contingent upon the employer’s involvement with the HSA. In short, the more involved the employer is with the HSA, the more likely it is that the HSA will be subject to ERISA and the exemption will not apply.[2] As a best practice, we recommend following the same prudent process that you would for selection and monitoring of a service provider for an ERISA-covered retirement plan.
So, if you have an HSA, how did you select your HSA service provider? If you don’t yet have a High Deductible Health Plan with an HSA option, but you are considering it, how are you planning to select the service provider for the HSA? You may want to consider the following when conducting a request for proposal process and/or reviewing proposals from your potential HSA service provider:
- Fees. HSAs can involve a variety of fees. Have you considered the fees that the employer may pay, as well as the fees the employee may incur? Fees in an HSA may include but are not limited to: monthly account fees, investment fees, transfer/change fees, excess contribution fees, stop payment fees, and swipe fees.
- Investments. Similar to the investment considerations in a retirement plan, the same considerations exist in an HSA. Some providers do not allow investment of HSA dollars at all, but for those providers that allow investment of HSA dollars, consider whether the platform is open architecture or whether there is a limited offering of pre-selected funds available for investment.
- Integration. For many employers, integration is critical. Working with a fewer number of vendors (i.e., the same vendor for the retirement plan and the HSA) can improve efficiencies for the employer and the employee. An integrated environment can improve outcomes. Some service providers have integration between the retirement plan and the HSA (which can include integrated websites, coordinated notice capabilities, etc.), while others have no level of integration available.
- Minimum Balance Requirements. One of the benefits of the HSA is its ability to be invested, but some service providers allow investing only after a minimum threshold is achieved and maintained by the employee. For example, employees must have a minimum account balance of $3,000 for their account to be invested.
While there are several other considerations for selection and monitoring of an HSA provider, these four items include the minimum considerations.
If you’re interested in learning more about HSAs, please join our upcoming webinar on February 20 focused on the basics of HSAs, common misconceptions about HSAs, and tips for selection and monitoring of an HSA provider.
For additional information about selecting an HSA provider, contact Multnomah Group.
Notes:
[1] See Wagner Law Group, When ERISA Applies to HSAs, available at: http://www.wagnerlawgroup.com/documents/WhenERISAAppliestoHSAs_000.pdf.
[2] Note that this is oversimplified as the exemption is beyond the scope of this post. Please see DOL FAB 2006-2, available here: https://www.dol.gov/sites/default/files/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2006-02.pdf.
Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice.
Any views expressed herein are those of the author(s) and not necessarily those of Multnomah Group or Multnomah Group’s clients.