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HSAs: What About the Fees?

Philip Betbeze, for HealthLeaders Media, July 18, 2014

That $2.50 a month might not sound like much, but that's just for maintenance of the cash account. If you somehow manage, over time, to accumulate enough in your HSA to think about investing that money in many of the vehicles your HSA administrator offers, $2.50 a month is just the beginning. If you invest in mutual funds after accumulating the required $2,000 cash floor in the account, you're subject to management fees and other fund fees that can run between 1% and 2% per year. Again, doesn't sound like much, but it can add up to a lot over time, especially if, like your 401(k), you accumulate a significant amount in these accounts over time.

Speaking of 401(k)s, fees in that industry have already caused controversy. So much so that the Labor Department instituted new rules on fee disclosures for 401(k) participants beginning in 2012, and the Supreme Court seems interested in further weighing in. Whether the new disclosure rules have been effective in helping plan participants realize how much of their money goes to management of their investments is debatable—many say they read like a dense prospectus more than a simple fee disclosure, but it's a start.

Since 401(k) fees are ubiquitous, and HSA accounts are less so, the attempt to reform them has been embarrassing to employers, but even more so for fund managers and 401(k) managers. They proved that for many, 401(k) fees were a rip-off. And not only were they a rip-off, they were cleverly hidden in the fine print, at least until the new disclosure rules went into effect.

Back to HSAs. My fees are clearly labeled in my statement, but considering the small amounts most people have in these accounts, $2.50 a month is a relatively huge percentage of their holdings.

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