Does anyone know of an HSA plan administrator who:
1) Allows employees to use a credit card with the account, that is programmed to only charge for authorized items under the plan.2) Also allows self-directed investments (bonds / stocks) for any surplus amounts in the plan.
I'm finding generally the firms who allow 1) do not allow 2), and vice versa.
How do they do 1)? If you go into a drugstore, how does the card processor know whether you are buying medicine or shampoo? I am under the impression that the credit card machine just transmits the total amount of the charge, with no description of the items purchased.
Bob Sandler
When I used my HSA card at a drugstore last week, the receipt had some indication that it was an HSA account. I assume the POS terminal would have rejected the card if I tried to use it for non-approved items.
BTW, one of the versions of the health care bill doesn't allow HSA to be used for OTC medicine.
On the Web sites of the big drugstore chains, HSA-authorized items are flagged with a symbol.
HSA Bank
If 2% isn't enough, they have a mutual fund option with a so-so set of funds, or you can open a companion account at TD Ameritrade and buy whatever you want.
I had my HSA and previous MSA there for about a decade, and never had any problems with them, although I didn't try any of the investment options. I moved my account last year because my local community bank started offering HSAs.
R's, John
My understanding is that the larger drugstores have now coded their over the counter items with a code that designates the item as approved for HSA expenditures. Pretty nice if true. We have employees who have such credit cards through a spouse's plan, and they swear by the convenience of this.
"John Levine" wrote
But I bet they don't allow self-directed investments. It's a control issue for the HSA administrator.
I wonder if you are allowed to have multiple HSA's, similar to you having multiple IRA's, and one is funded for the credit/debit card transactions, usually through a bank, and the other one can hold the self-directed investments portion.
Bet accepted. Is there some reason you snipped the following sentence out of the message you quoted?
If 2% isn't enough, they have a mutual fund option with a so-so set of funds, or you can open a companion account at TD Ameritrade and buy whatever you want.
If "companion account" or "buy whatever you want" is unclear, I'll be happy to provide more details.
R's, John
Don't get all snippety. Seems like if HSA bank allowed you to self-direct the part that is in HSA bank, you'd have said so. There wouldn't be any need to stroll over to TD Ameritrade to handle the self directed part. And apparently TD Ameritrade doesn't provide the credit/debit card services. So.......where were we?
The receipt I get shows how much is HSA-eligible, so the store (CVS) knows. If they also know the card itself is an HSA card, they can limit the charges.
Personally, I prefer to earn airline miles using my own credit card, and let the HSA reimburse my bank account.
Seth
But that scenario still has some utility. Keep HSA under HSA Bank's account for a year, and then roll over the surplus to the Ameritrade HSA. Over a 10 year period you might get enough in the Ameritrade side to be interesting, if you manage to stay healthy anyway.
"W" wrote
Still, not one place provides for both needs.
Are you certain that TD Ameritrade has HSAs? They didn't offer it when I asked them in 2004 and 2005. I ended up opening my HSA at State Farm Bank (a company related to the insurer of the same name), because they were the only trustee I found that didn't require another account. I'm still there.
I have a recollection of hearing that these accounts would lose whatever amount is left at the end of the year. Is that the case? If not, what am I thinking of?
Maybe FSAs (Flexible spending accounts) under employers' cafeteria plans.
Yes, FSA's are "use it or lose it" plans.
Or, there is a Health Reimbursement Arrangement (HRA aka HCRA) which is funded totally by the employer, totally tax-free to the employee, and which does rollover from one year to the next, but the unused balance can never be given to the employee.
Generally, participation in a FSA or HRA precludes making contributions to an HSA, but there are exceptions.
Pub 969 is a handy summary of all the well-known tax-advantaged health care reimbursement plans, Pub 15-B tells the employer's side of the story.
-Mark Bole
Sheesh, I guess "companion account" is indeed unclear.
Your HSA at HSA Bank is one (1) account, with multiple investment options. Unless you tell them otherwise, your HSA assets are in an interest bearing account at the bank, from which you can make withdrawals using checks or a debit card.
You can tell HSA Bank that you want a self-directed investment account. To do so you fill out an Ameritrade brokerage application and sent it back to HSA Bank. This isn't Ameritrade's normal application, it's some sort of custody account via HSA Bank. Then when it's set up you can visit HSA Bank's web site to slosh money back and forth between the bank account and the Ameritrade account, and you can visit Ameritrade's web site to buy and sell all of the stuff they let you buy. The account has the same restrictions as a Keogh or IRA, e.g., no margin and no options.
It's still one HSA, the only way to get money in or out of the brokerage account is via the HSA bank account. Info is here:
I've also seen HSAs which are just investment accounts, with no checks or debit cards. For those, you keep track of your medical expenses, and once or twice a year you mail them a request for reimbursement and they they mail you a check. If your cashflow is good enough, this can be more financially advantageous than paying directly out of the HSA particularly if as someone noted you pay with your regular credit card and get points or a rebate.
Someone else asked whether you lose your account at the end of the year. No, that's an FSA. An HSA is yours to keep. The rules for non-medical withdrawals are similar to the rules for an IRA.
R's, John
I can buy options in an IRA. (I'm not sure if I can write covered calls.)
Seth
Let's say you bought some puts and the market has gone way way down, and the puts are about to expire way in the money.
The IRA custodian has a fiduciary duty to exercise them for you, but you have no stock to deliver. So broker buys the stock, then delivers it so you can put the put seller.
And in doing so you exceeded your annual IRA contribution limit.
Similar argument for buying calls, where market falls except for your stock. To protect you from call expiring while far in the money broker exercises call for you, immediately causing you to make more than allowed IRA contributiions.
One might wonder why broker in such a position with in the money calls about to expire doesn't just sell the calls? Because brokers simply don't do that.
I can understand brokers allowing you to write covered calls in an IRA, but am really surprised to hear they will let you buy options.
I have made *no* contribution. (Rather, the IRA custodian sells the puts before they expire, for $0.05 less than they're worth; anybody who was thinking of selling anyway would buy them, and make $.05 per share more than otherwise; or an arbitrageur will grab the deal.)
What would happen (and did, in a non-IRA account) is that the broker _borrows_ the stock and _delivers_ against the put. My account is then short the stock, and eventually I have to buy it to cover the shortage.
That can't happen in an IRA, because the IRA can't borrow.
A contribution is made whan *I* contribute money to an account. It is not made because a broker does transactions in the account.
Sometimes they do. I've used brokers who will do whatever I tell them (in the market, subject to legality and me having enough money to cover it).
Seth
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