January 1, 2010

Q: My company has started an HAS and I expect to have the $5650 in the account by Dec. 31. I would like to roll this plan year to another account that supports investment in mutual funds. Do you support this option to rollover to you?

A: There are many investment companies that will handle a health savings account now and, in general, the services and choices available vary with the fees you pay. The Web site www.HealthSavingsAccount-HSA.com lists some of the free or least expensive reputable HSA administrators. A company called "Health Savings Administrators LLC" has an exclusive arrangement to offer Vanguard no-load mutual funds in HSAs ( http://healthsavingsaccount-hsa.com/hsaacounts.htm) and does a great job with the administrative and customer support functions to handle a tax-free rollover of the account. It would be hard to beat the long term returns from these funds for the nominal account fees. Most investment firms handling HSA accounts charge some type of asset fee or commissions.

To accomplish the account rollover when you are ready, just fill out the appropriate section on the new account application. The custodian does the rest; ensuring that you will not be taxed on the money taken from the old HSA account.

Keep in mind that it makes sense to keep a few thousand dollars in HSA funds in liquid investments, like a money market fund, to cover medical expenses up the amount of your policy deductible. If you were to have the misfortune of incurring medical expenses at the same time the market is in a decline, the financial effect would be exaggerated because you may be forced to sell investments during a slump in price to cover the medical billing. One advantage of an HSA in a mutual fund company is that you can easily switch between different types of investment classes - from money market to stocks to bonds, etc., as you wish.

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