(How I accidentally timed the market)
I finally moved my Health Savings Account out from its high-fee custodian.
While I was working, I was enrolled in a High Deductible Health Plan (HDHP). This allowed me to contribute to a Health Savings Account (HSA).
Much has been written in other blogs about HSAs, so I’ll direct you to my favorite to learn more. The short story is they are great ways to save in a tax-advantaged manner, so if your health care needs are compatible with the benefits provided by a HDHP, you should be contributing the most you can to an HSA!
When I left work in 2018, I also left my employer-sponsored health insurance. The new policy I purchased from the ACA exchange was not an HDHP, so I could no longer contribute to the HSA. In addition, my HSA custodian (Payflex) was associated with my old insurance company. Once I was no longer an insurance customer, they started charging a $5 monthly fee for me to keep my HSA account with them.
I knew there were better deals out there than $5 per month to hold my money. I’d researched other HSA custodians and found some cheaper options, but had procrastinated on actually transferring my account. Then in November 2018 Fidelity announced they would now offer free HSA accounts to private customers (they’d previously only been open to institutional accounts). I am already a Fidelity customer (I started my first IRA with them back ~ age 18), so I was especially attracted to this new offer as a way to reduce the number of different financial companies I deal with.
Making the Switch
Opening the account and making the transfer was fairly simple, but took longer than I anticipated. I opened the account with Fidelity online on November 16, the day after Fidelity opened their HSA to retail investors like me. I had to fudge some of the online account opening questions. Fidelity asks if you are currently covered by a HDHP. If you are not, you are ineligible to open an HSA. Because I just wanted to transfer an existing HSA, I had to pretend I was eligible for a new one. Once I did that, the account opening was easy.
Fidelity requires an actual signature to make a transfer from another institution into the HSA. (Note: Fidelity’s Transfer of Assets form is used for many types of transfers. There is a box for a Medallion Signature if needed. It is not needed for HSA transfers.) Fidelity nicely pre-populated most of the form for me, but it took me a few days to print it out (along with the required most-recent statement from my Payflex account) and sign it. I don’t print very often, so it was a process….
I got around to printing the required papers on November 21 (the day before Thanksgiving). Then I forgot to actually mail it until November 26 (Monday). Fidelity didn’t mark it received until December 4. On that day they processed it and sent the transfer request to Payflex. Then I waited. And waited. While I was waiting, I got a letter in the mail from Fidelity. They had tried to contact Payflex to determine the status of my transfer request, but Payflex would only deal with me directly.
When I initiated the transfer, I sold off my investments in the Payflex account to simplify the transfer as an all-cash deal. I don’t think I needed to (Payflex would have liquidated the account for me), but I did. On December 12, Payflex took a $25 “account closure fee” cut, and marked my account as “pending closure”. On December 23, my account was marked closed with a balance of $0. I’m apparently not the only one slow to put things in the mail. Payflex reported they printed a check to Fidelity on December 23, but didn’t mail it until December 28. (Why did my money have to go through the mail by paper check? I think so Payflex could hold on to the funds for as long as possible.) On December 31, Fidelity marked the funds received and processing. It took another few days for the money to be available in my account so I could invest it. Finally, on January 3, I was able to reinvest my HSA funds. 48 days from start to finish, only 10 of which was my delay.
The upside of the transfer delay is that money was sitting in cash from mid-November through the end of the year. I avoided a loss of over 10%. Inadvertent market timing FTW!
How to Do It
Here are the required steps for transferring an HSA to Fidelity:
Go to: https://www.fidelity.com/go/hsa/why-hsa and click the button “Open an HSA”.
If you already have an account with Fidelity, you’ll have to log in. If you don’t have an account, you’ll have to create one.
Answer the questions to establish eligibility for the account.
Once the account is open, you can make contributions (if eligible) or transfer funds from another HSA.
If transferring from another HSA, select the “Transfer” tab on the top menu bar.
Choose where you want the money to come from (likely “Another Institution”) and follow the prompts to identify that institution and create your transfer document.
You’ll need to print and sign the form and include a copy of a recent statement from your existing HSA custodian. You do not need a medallion signature.
Snail mail your documents to Fidelity … and wait patiently.
