While there have been various interpretations as to how the new rules would impact the fiduciary status of employers and advisers as it pertains to health savings accounts (HSAs), the prudent approach for employers and advisers alike is to proceed as if they are indeed fiduciaries to their HSA plans.
This fiduciary mindset and approach should begin at the point of HSA provider selection. Thus, a customized, process-driven approach to determine the best provider is critical. The first step of this process is for the adviser to open a dialogue that helps guide the employer to identify and weigh the most important characteristics and features an HSA provider must offer.
Pricing is an obvious consideration when assessing providers, but there are many other important factors to consider when evaluating potential providers. For example:
- Employees over time can build large balances in their HSAs. Who is the provider’s custodian and what is their bank rating?
- Depending upon the financial sophistication of their employees, employers will have different views on the minimum cash balance (investment threshold) required before investing. What is the investment threshold required by the provider before investments are allowed? Some providers will allow first dollar investing, while others require minimum cash balances of $1,000 to as much as $3,000 before investing is permitted.
- Is the employer comfortable with a provider that offers a limited number of funds for investment or would they prefer the fund options to mirror their 401(k)? Many providers limit investment options to a set group of funds, while others will consider an open architecture framework. In addition, there are providers who offer self-directed brokerage as an option.
- Education and outreach is vital to the success of an employer’s HSA. An HSA offering might meet the structural criteria of an employer, but it is unlikely that participation in the HSA will meet expectations if the provider does not offer a strong communication and education opportunities. When the employer has a problem or concern, does the provider have a dedicated account manager assigned to the account? How robust is the provider’s reporting of the plan’s results to the employer and advisor? When an employee has a question, what call center resources does the provider have available? Does the provider offer web-based and/or onsite employee education? What level of integration is there between the provider and the health insurance company?
A documented, process-driven approach to the selection of an HSA provider is vital to adhering to a fiduciary standard. In addition, this approach increases the likelihood of a successful implementation and participation by the employee.
Matt Clarkin is the president of Access Point HSA.
Be sure to join Matt, along with Daniel Bryant, CEO & Managing Partner at Sheridan Road, and Kevin Robertson, SVP & Director of Sales at HSA Bank, at Workshop #7, HSA “Match” – The “Other” Retirement Savings Account, at the NAPA 401(k) Summit. Register today at napasummit.org.