Leo Acheson, CFA
Leo Acheson, CFA, a senior analyst covering multiasset strategies at Morningstar Inc., Chicago, which tracks more than 620,000 investment offerings. Morningstar.com
Just because your employer offers a particular health savings account doesn’t mean that you have to choose that one. As long as you are enrolled in a qualified high-deductible health insurance plan, you can set up a health savings account (HSA)—an account that lets you avoid paying tax on earned income and then use it to pay health-care expenses—with any of the hundreds of qualified providers that offer them. And there may be excellent reasons for choosing an HSA not provided by your employer—a choice that could end up meaning hundreds or even thousands of dollars in extra money in your tax-advantaged account over the years.
The best HSA for you depends, in part, on whether you tend to spend your HSA money fairly soon for current health-care expenses…or invest the money and spend it in later years.
To help people choose the right HSA, investment research firm Morningstar Inc. recently assessed how suitable the largest ones are for these two types of HSA users. (Search online for “2017 Health Savings Account Landscape” to get the full rankings.)
For immediate spenders, the research firm focused on the maintenance fees charged by each plan, which ranged from nothing to $4.50 monthly, and on interest rates offered by the providers’ checking accounts, which ranged from 0% APY to 1.05% APY. Top ranked: Alliant Credit Union…The HSA Authority…Select Account.
For people who tend to hold and invest their HSA balances, Morningstar focused on the range of investment options offered by various HSA providers and the quality, cost and performance of these investments. Top-ranked: HealthEquity…OptumBank…The HSA Authority…and Bank of America.
All paycheck contributions to HSAs are triple-tax-advantaged (you fund your HSA with pretax dollars…the money grows tax-free…and withdrawals for both you and your spouse are tax-free for qualified health-care expenditures). If your HSA contributions do not come directly out of your paycheck and you make them yourself with after-tax dollars instead, you can claim an income tax deduction for them on Form 1040 of your tax return.
