Many financial organizations agree that Health Savings Accounts (HSAs) are transaction-heavy accounts, meaning that contribution and distribution transactions commonly occur on a weekly or monthly basis. As a result, some HSA custodians and trustees charge fees to offset the cost of administrating these accounts for their customers. The types of fees associated with HSAs could include:
- Monthly or Annual fee
- Transaction fees
- Minimum balance fee
- ATM withdrawal fee
- Debit Card fees including issuance, replacement, or termination fee
- Check fees including check ordering or check copying fee
- Paper account statement fee
- Stop payment fee
- Excess contribution earnings calculation fee
- Account closing fee
- Transfer fee
And some financial organizations charge all of the fees listed above!
Ability to charge fees
It is important that the HSA agreement used by a financial organization contains language allowing it to be reimbursed for account-related expenses. Article 11.04 of the Wolters Kluwer HSA agreement reads as follows:
Our Fees and Expenses. We may charge reasonable fees and are entitled to reimbursement for any expenses we incur in establishing and maintaining your HSA. We may change the fees at any time by providing you with notice of such changes. We will provide you with fee disclosures and policies. Fees may be paid directly from your HSA assets, and/or billed separately to you. The payment of fees has no effect on your contributions. Additionally, we have the right to liquidate your HSA assets to pay such fees and expenses. If you do not direct us on the liquidation, we will liquidate the assets of our choice and will not be responsible for any losses or claims that may arise out of the liquidation.
An HSA custodian/trustee not using the Wolters Kluwer HSA agreement should review its HSA agreement for “fees and expenses”-related language.
Using a separate fee and policy disclosure attached to your HSA agreement, fees can be disclosed at the time an HSA is established. For existing accounts, a financial organization would need to provide a notice of the fee change(s). This could be easily accomplished with a written notice that includes a fee and policy disclosure mailed to each HSA owner.
There are generally two ways that HSA custodians/trustees collect fees:
- They are paid separately by an HSA owner or his/her employer, or
- They are collected by directly debiting the HSA
Fees paid by an HSA owner or his/her employer directly to an HSA custodian/trustee are not contributions and do not count toward the annual HSA regular contribution limit. Fees debited directly from an HSA are not reportable distributions. Once a fee is debited from an HSA the account owner cannot pay the fee separately. If an HSA owner reimburses his/her HSA for a fee, the deposit is considered a regular contribution for the tax year.
Determining fee structure, fee types, fee amounts, fee disclosure, fee collection, and policies relating to everything mentioned, are areas a financial organization should analyze as it moves forward with its HSA program.