HSA Optimization

⚠️ While this guide references a specific HSA provider (Optum), the general principles apply to other providers as well.

Why should I transfer funds out of Optum?

Optum only lets you invest funds once you have (and maintain) $1,000¹ in cash.

Optum charges an $18 annual fee¹ to use their investment service.

Investment options are limited to a small set of mutual funds.

Why Fidelity?

Fidelity offers an HSA with no account minimums or recurring fees. Other HSA providers include BofA, HSA Bank and lively.

Why Invest?

A HSA account is triple tax advantaged. No taxes on contribution, no taxes on growth and no taxes on withdrawal.

You can file claims for qualified medical expenses at any point in the future. This means you can let your HSA funds grow tax-free for decades while holding onto your receipts. When you need funds, you can redeem these receipts for a tax-free withdrawal, even years later.

Read more here

Preparation:

1. Open a Fidelity HSA account if you don’t already have one. This is optional as you can open one during the transfer of assets flow.
2. Make sure you liquidate your investments in Optum (if applicable)
   1. To do this, you must log in to your online account, select “Sell Investments,” then select “Liquidate Entire Portfolio.”
      1. If your account had automatic investments, you must also pause your automatic investment to prevent your liquidation from re-investing.
      2. To do this, you must log in to you online account, select “Manage Automatic Investments,” then select “Pause Automatic Investments.”
   2. This may take a couple of days
   3. [Optional] Close the investment account in your HSA to avoid paying the annual fee.
3. Go to Optum Financial and find your account number
4. Download your latest HSA Statement

How to transfer

1. Go to Fidelity’s Transfers of Assets page.
2. Enter Optum Financial - Hsa (Or whatever your HSA provider is) as the institution name.
3. Put in your account number you found in Preparation step 3.
4. Select account type HSA 
5. Choose An Existing Account  if you already have an account.
6. Chose “Some of my account” and “A specific cash amount”. Specify a cash amount slightly less than your full HSA balance.
   1. ⚠️ DO NOT TRANSFER All of my account⚠️. Leave some in so you don’t get charged a fee.
   2. This may close your HSA and you may be charged a $20 transfer fee¹.
7. Attach the statement you downloaded in Preparation Step 4
8. Go through the rest of the form

You can track the transfer here and you can call Fidelity if you have any questions or they will call you if there are delays.

FAQ:

• Debit Card?
  • Yes they offer one. Unclear if there needs to be cash in the account before you use it or not.
• Will new monthly contributions will go to Optum?
  • Yes, new payroll deductions (contributions) will go directly to Optum. You can make after-tax contributions (that you can mostly deduct) to Fidelity but you lose out on the 7.5% FICA taxes that are waived on a payroll deduction.
• How do I take withdrawals from my Fidelity HSA?
  • Ways to take withdrawals from your HSA

Note:

Some HSAs will charge you per transfer. This depends on your the agreement your employer has with your HSA provider.

At a $25 fee per transfer and assuming a 7% annual return in stocks, moving funds every 4–6 months typically minimizes both the total fees and the opportunity cost of not being fully invested.

Gabe Chai

Software Engineer in NYC