HSA options for tax-deferred savings

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An estimated 48% of all private industry workers had the option to participate in a high deductible health plan (HDHP) in 2020. With an HDHP comes the opportunity to select one of the best health savings accounts (HSA) providers, and we’ve compiled the details you need to select one for yourself or your business.

Keep reading to find out how you can choose the best company that will allow you to earn tax-free interest on your investment.

HSA options for tax-deferred savings

Best Overall: Fidelity
Best for Employers: The HSA Authority
Best for Plan Choices: Further
Best for Low Fees: First American Bank
Best for Investment Options: HealthEquity
Best for Pricing Transparency: Lively

Best Overall : Fidelity

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Why We Chose It: Fidelity tops the list with very few fees, no account minimums, several investing options, and services for individuals and businesses.

What We Like

Individuals pay no account management fees with no account minimums required
Several investment options, including fractional shares

What We Don't Like

Interest rates are 0.01% annual percentage yield (APY) on cash deposits
Employers have a recordkeeping fee they may pass on to individual subscribers

Fidelity took our top honors for its services to individuals and businesses. Fidelity does not charge fees for opening an account, ordering debit cards, overdrafting an account, and stopping payments. Fidelity charges employers a recordkeeping fee that they can pay directly or pass on to employees. This fee is up to $48 per year and depends on a person’s HSA account balance.

At 0.01% APY on cash deposits (as of December 2021), Fidelity’s interest rate is low. However, this rate is aligned with some of the other providers in the market. If you wish, you can choose to invest your HSA funds instead to earn a higher interest rate.

Should you choose to do so, Fidelity has several investing options. These include options that do not require a minimum balance and offer fractional shares, allowing you to invest in companies with a more expensive stock. You can choose from several investment funds, including those from Wells Fargo, T. Rowe Price, and more.

Fidelity’s deposits are FDIC-insured up to $250,000 per account. The company also offers a web-based platform and mobile app that easily makes your account accessible.

Best for Employers : The HSA Authority

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Why We Chose It: The HSA Authority makes it easy for employers and employees to sign up for their program. The program also includes customer support services and education.

What We Like

Customizable education materials for your company
Dedicated team for employer customer service
No minimums on deposits

What We Don't Like

Fees for account closing ($25), paper enrollment ($14.99), and manual account opening ($20)
Must have at least $1,000 in deposits to invest

While The HSA Authority offers many positive benefits for individuals, the company is a real standout for employers because it offers a dedicated team and customizes educational materials for your business to help your employees understand how to utilize their HSA best. In addition, the company offers several tools that make setting up your employees’ accounts as easy as possible, such as online calculators and many educational presentations.

An easy registration process can increase employee satisfaction with their insurance plans. The HSA Authority has no minimum balance requirements for employers or individuals with an HSA.

At 0.01% for deposits up to $5,000.99, The HSA Authority’s interest rates are similar to that of other companies. However, the company offers a 0.05% APR for balances of $10,001 or more (as of December 2021).

On the individual side, there are some fees involved that other companies may choose to waive. These include a paper enrollment fee of $14.99 and an account closing fee of $25. If you choose to utilize their investment website, it will cost you $36 per year.

Best for Plan Choices : Further

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Why We Chose It: Further offers three HSA types, so you have the power to choose how you’d like to manage your account.

What We Like

Offers three HSA account types
Interest rates are slightly higher than most other providers

What We Don't Like

Must have $1,000 in deposits before you can invest
More fees associated with the account, such as account service fees

If you don’t feel like a one-size-fits-all subscriber for an HSA, Further may be the account option for you. They offer three types of HSA accounts: Further Premium, Further Value, and Further Select. The Further Value account is the least expensive option at $1 per month.

Each account type earns a higher interest rate than the other HSA providers we reviewed. For example, with a Further Premium HSA that charges $4 per month, you have an annual percentage rate of 0.35% for investments of $2,499 and lower. The maximum percentage rate offered is 0.70% for Further Premium with an investment greater than $25,000 (as of December 2021).

You can evaluate Further’s pricing and interest rates to determine the best fit for you. Further does not charge for several services, including account opening/closing, stopping payment, or ordering replacement debit cards. However, Further does require more fees than some providers that made our list. For example, there is an annual account service fee of $18.

We also liked the company’s “Learning Center,” which featured educational tools on a variety of topics related to investing and HSAs. If you aren’t sure where to start on an HSA, this center’s materials will help.

Best for Low Fees : First American Bank

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Why We Chose It: There is no fee to open and maintain an account, plus high interest rates.

What We Like

$0 minimum to open an account
No monthly fees to maintain an account
Interest rates of 0.075% per quarter or up to 0.30%

What We Don't Like

Must have a $1,000 account balance to invest
$3.95 monthly fee if you receive paper statements

First American Bank is a privately held bank located in Illinois. However, they offer their HSA across the country along with personalized customer service and low fees for customers. There is no fee to set up an account or maintain it, and you’ll receive a free Mastercard debit card you can use to make payments at your doctor’s office.

You must have at least $1,000 in your account to invest with First American Bank. However, even if you do not invest, its interest rates are slightly higher than many companies we reviewed.

First American Bank offers both an online portal and an app called FAB Health. They are FDIC-insured, so your money is protected up to $250,000. However, as with all accounts, investment earnings aren’t protected.

The bank’s HSA isn’t completely without fees. You will pay $3.95 per month if you choose to receive paper statements.

Best for Investment Options : HealthEquity

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Why We Chose It: HealthEquity offers easy-to-understand investment advice, the ability to manage your investment portfolio, or opt for an “AutoPilot” option where their investment experts help manage your portfolio.

What We Like

Easy to understand investing advice and options
Multiple VanGuard mutual funds to use as investment vehicles

What We Don't Like

The balance must exceed $2,000 before you can invest in mutual funds for free
Must pay a monthly fee to invest in mutual funds if your account balance is less than $2,000

If you view your HSA largely as an investment or are simply looking to get the most out of the money you put in, HealthEquity is a good choice for you. It offers helpful tutorials in the form of videos and online guides on its site regarding the investment potential in your HSA that can make you feel financially savvy.

HealthEquity also offers you the potential to choose two routes for investing your money: selecting your own VanGuard mutual funds or using their “AutoPilot” option, where their algorithms manage your portfolio. Vanguard is the largest mutual funds provider globally and manages trillions of dollars, which helps to lend security to your investments.

However, it’s important to note that you must have at least $2,000 in your HSA before you can invest in mutual funds without paying. If you have less than $2,000 in your account, you can still invest but must pay a monthly fee.

HealthEquity serves both individuals and companies; more than 100,000 organizations utilize their HSA services. They are a non-bank HSA “custodian” option that offers 24/7 customer service. If signing up as an individual, you can enroll at any time. If signing up with a company, you must wait for your open enrollment period.

Other additional features HealthEquity offers include a debit card you can use for doctors’ and pharmacy visits as well as a mobile app to manage your account.

Best for Pricing Transparency : Lively

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Why we chose it: Lively lists its fee schedule on its website and charges $0 a month for individuals with no minimum balance required.

What We Like

$0 fees per month with no minimum balance for individuals
Provides a full list of fees, many of which are $0
No minimum account balance requirement

What We Don't Like

Interest rates are lower at 0.01 % annual percentage yield on cash balances

Lively brands itself as a “modern health savings account” as the company endeavors to ensure its clients use their accounts’ maximum benefits. One way they accomplish this is by keeping prices low and as transparent as possible. They list a menu of fees on their website, many of which are free, including funds transfer, debit cards, and excess contribution fees.

Individuals opening a Lively account pay $0 per month with no minimum balance requirements. They also have free access to investments, if desired. If individuals do wish to obtain Guided Portfolio investments, the annual fee is 0.50%. Employers who utilize Lively pay $2.95 per employee monthly. Lively is FDIC-insured through its bank partner, Choice Financial.

Lively’s website presents a “just-the-facts” look at their offerings, plus some additional articles with advice and resources to learn more about HSAs. Some users will enjoy this simplified approach to choosing an HSA carrier.

Final Verdict

HSA companies vary in their interest rates, fees, and customer service. Choosing the right one for you or your employees requires careful consideration of these and other factors to maximize your investment and minimize out-of-pocket costs.

Compare Providers

Best Health Savings Accounts
Site	Why We Picked It	Monthly Fee Individuals	Monthly Fee Employers
Fidelity	Best Overall	$0	Up to $48 per year
The HSA Authority	Best for Employers	$0, must have $1,000 to invest	$0
Further	Best for Choice	Varies based on account	Not listed
First American Bank	Best for Low Fees	$0, must have $2,000 to invest	Not listed
HealthEquity	Best for Investment Options	$2.75 per month for balances below $2,500	2.50 per month per employee
Lively	Best for Pricing Transparency	$0	$2.95 per month per employee

Frequently Asked Questions

How Do HSA’s Work?

A Health Savings Account (HSA) is part insurance plan, part savings account. To have an HSA, you must first have a high-deductible health plan (HDHP). For 2022, this deductible was a minimum of $1,400 for an individual and $2,800 for a family, according to HealthCare.gov. The advantage of this plan type is that deductibles tend to be low, plus you can combine the plan with an HSA to experience tax savings and earn interest.

The minimum deductible for an HDHP varies annually. You can contribute non-taxed dollars to your HSA, then use these dollars to pay for health expenses toward your higher deductible.

The “savings account” portion of the HSA means the funds you contribute to your HSA have the potential to earn interest over time. Because HSA funds roll over from year to year (and the earnings are not taxed), you may be able to use the HSA account to make money and pay fewer taxes.

Both an employer and an individual can contribute to an HSA. If your employer does make contributions to your HSA, these aren’t listed as income, according to the IRS.

What Is a Health Savings Account Provider?

HSA providers include insurance companies that may offer the HSA along with their insurance plan. Also, banks and some financial institutions may also offer an HSA independent of your insurance policy. The Internal Revenue Service (IRS) calls these companies “HSA trustees.”

The account is portable once you choose an HSA provider (even if your current employer contributes). This means that you can keep the account even if you change jobs or retire.

What Are the Out-of-Pocket Costs Associated With a Health Savings Account Provider?

You cannot use your HSA to pay for insurance premiums associated with your HDHP. Therefore, you will have to pay your premiums out-of-pocket using money that’s taxed. However, when it comes to an HDHP combined with an HSA, the money you pay toward your deductible is still technically out-of-pocket. However, the money paid using an HSA is not taxed.

Are There Exclusions for What the Money Can Be Used For?

You can use funds in your HSA to pay for services such as:

Coinsurance
Copayments
Deductibles

However, you typically cannot use HSA funds to pay for insurance premiums.

When you reach age 65, you can use your HSA account for any desired expenses. However, if these aren’t medical expenses, you will pay income taxes on the funds used. The benefit of this withdrawal over a retirement account is that there is no minimum on the funds you can withdraw from your HSA at or after age 65.

Is an HSA Tax-Free?

The money you contribute to an HSA is not taxed. Ideally, this approach will help you save money so you can use untaxed dollars in your HSA to pay for qualified medical expenses. Because these funds are not taxed, there is a limit to how much you can contribute to an HSA. For 2022, this amount is $3,650 for individual (self) coverage and $7,300 for family coverage.

One aspect of an HSA that is different from some other similar accounts, such as a Flexible Spending Account, is that HSA funds can be rolled over on a yearly basis. If you do not use the tax-free money you contributed, it can continue to earn interest in your HSA and you can use it at a later time if desired. Earnings or interest on an HSA are accumulated on a tax-free basis.

Who Can Use an HSA?

HSAs are for those with high deductible health plans. These are plans that have minimum deductibles as the federal government sets forth on a yearly basis. In 2020, the average HDHP deductible was $5,316, according to the Journal of the American Medical Association (JAMA).

To be eligible for an HSA, you must meet the following requirements the IRS outlines:

Have insurance coverage under an HDHP
Have no other health coverage other than what the IRS specifically permits (such as a prescription drug plan)
Not be enrolled in Medicare
Are not a dependent on someone else’s tax return

Also, an HSA is for an individual only. Couples or families cannot have a joint HSA account.

Methodology

We reviewed 15 companies that offer HSAs to both individuals and employers before narrowing the field down to six. Considerations included customer fees, interest rates, and investment opportunities. We also considered customer service and web- and app-based educational tools when making final selections.

Article Sources

Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.