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Carroll S Golden
a book bubble about
How Not To Pull Your Family Apart
Parenting & Relationships
Author Insight
Legally Equally-Are They All The Same?
Morningstar has released its annual "report card" on providers of Health Savings Accounts (HSAs), the tax-advantaged, "triple-tax-free" accounts originally introduced in 2003 to make high-deductible health plans more appealing. Since then, HSA assets have surged 22-fold, reaching $123 billion by 2023, as high-deductible plans have expanded from covering 7% to 31% of workers in employer-sponsored insurance. The average American incurred about $13,500 in healthcare expenses in 2022, according to data from the Centers for Medicare and Medicaid Services cited by Morningstar. Crucial to financial advisors and tax professionals working with clients who have HSAs, an average of 74% of plan participants across surveyed providers used their accounts only for medical expenses, missing out on the opportunity to invest and grow their HSA funds. While the report cites low interest rates and relatively high fees for investments and custodial services as factors in the generally low ratings for HSA providers, there have been meaningful improvements. Fees on investment and spending accounts have declined, and investment options continue to improve in quality. However, the report notes room for growth in HSA transparency, ease of use, and further reductions in custodial and investment fees.
Book Excerpt
How Not To Pull Your Family Apart
Nicole, looking hopeful, mentions, “I know Erik has a flexible savings account at work? Is that the same?”
“No, sorry dear, it isn’t,” Jodi says, “but I am glad you asked. It’s easy to mix the two up since both FSAs and HSAs are pretax accounts you can use to pay for health-care related expenses.”
Having piqued everyone’s interest, Jodi throws out a second question. “How would anyone who is not contributing to an FSA account open an HSA account?”
“You better just tell us, Mom,” says Nicole.
“Actually, there are two ways to open an HSA account,” Jodi explains. “Since the HSA belongs to the individual and not the employer, as long as you are covered by a high deductible health plan, you may open and contribute to an HSA. The other way is how Dad and I did it. Since we have a qualifying high deduction health plan through work, we were also able to open an HSA through our employer.”
Nicole continues her inquiry. “What if my employer doesn’t offer an HSA account? Where can I open one on my own?”
Jodi answers, “First, remember that you cannot contribute to both an HSA and FSA. From what I read, Nicole, you may want to check first with your human resources department since my employer, like others, contributes money to my HSA. I suspect my employer may pick up the fees as well. I found this helpful chart to explain the triple tax advantages of HSAs.
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