When looking for the right health savings account custodian, you’ll quickly discover there are almost as many fee options to consider as there are custodians themselves.
These fees, however, generally fall into a handful of categories. And once you have a better understanding of these categories, and the service options that go along with the fees in question, you’ll be better prepared to find the right blend of fees and services to fit an employer’s unique situation.
Many custodians charge employers a large implementation fee for general setup or specific services. These fees typically are based on a flat rate, by the capabilities selected, or an hourly programming rate. When an hourly rate is involved, custodians should be able to estimate the programming time required and maximum charges.
Most of the fees charged to employers after HSA accounts are set up fall into two classifications: fees incurred due to special circumstances and fees incurred during the normal course of business.
Fees incurred due to special circumstances include charges for things like overdrafts, removing excess contributions and correcting Internal Revenue Service reports.
Fees incurred during the normal course of business can include fees for transactions, monthly statements, check printing and withdrawal requests. Because these fees are based on the activity in an account, benefit advisors should determine how employees are likely to use their accounts to calculate the resulting financial impact. If employees are expected to use these services heavily, a custodian that does not have as many of these fees may be the better choice.
However, during the upcoming open enrollment season, expect to see a shift away from HSA custodians charging employers a combination of monthly and special fees toward a per-employee per-month fee.
A PEPM is a flat monthly rate charged to the employer for the administration of the account. A PEPM will typically include the primary services related to using and administering the account.
Most employers are familiar with the PEPM rate concept because the third-party benefit industry often uses it to administer flexible spending accounts and health reimbursement arrangements.
There are also no-fee options available that may seem like an attractive alternative, but it’s important to note they often have accompanying conditions. For instance, in order to qualify for a free account, some HSA custodians might require other accounts with the financial institution involved, minimum automatic monthly deposits or maintaining a minimum balance.
It’s also important to realize the service options offered by HSA custodians vary even more widely than the fee schedules. There are many companies that are beginning to sell HSAs, but sometimes it’s not easy to find the right combination of service and support that employers need to manage an HSA offering for their employees efficiently.
For instance, a custodian may have different contribution options for employers and employees that could include contributions online, by check, with direct deposit, or through wire or phone transfers.
Does the custodian provide reporting services for employers and employees? For employers, reporting options may include summary information and customer service performance statistics. For employees, they can include account statements and online access. You may also want to ask whether enrollment occurs online, through electronic data files, over the phone or by paper.
HSAs can be an attractive method for saving employers money, but if you don’t read the small print to understand exactly what employers will be charged and what they’re getting for those fees, those savings might not materialize.