Health savings accounts, paired with high-deductible health plans, are designed to ease medical costs. HSAs offer a rare triple tax advantage — contributions are pretax, earnings grow tax-free, and withdrawals for qualified medical expenses are also tax-free. Yet many account holders don’t contribute the full amount allowed, and even fewer invest their HSA balances beyond basic savings accounts.

Low-income workers often struggle to fund HSAs, making the HDHP–HSA pairing less helpful for them, critics say. But even higher earners sometimes avoid maxing out their accounts, partly because many HSAs charge maintenance fees or additional costs for investing.

Unlike 401(k)s, HSAs can be freely moved between providers through transfers or rollovers. Here’s how to determine whether your HSA falls short — and what to do if it does.

High-value tax benefits can be undercut by costs

HSAs can outperform other tax-advantaged accounts, particularly for those expecting ongoing medical expenses. Even if used for non-medical purposes, HSAs still behave similarly to traditional 401(k)s or IRAs. But fees and limited investment options can significantly reduce their value, especially for small-account holders.

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Key items to review include:

Setup fees: Charges at account opening, sometimes covered by employers.
Maintenance fees: Monthly or annual charges to keep an account active.
Transaction fees: Costs tied to using HSA funds for medical payments.
Savings-account interest: Crucial for those keeping money in cash; rates often rise with larger balances.
Investment expenses: Fund fees, sales loads or management charges.
Investment options: Ensure available funds align with your long-term strategy.
How to leave a subpar HSA

If your employer-linked HSA has high fees or poor investment choices, you have three options:

1. Open your own HSA.
If you’re enrolled in a high-deductible plan, you can contribute to an HSA of your choice and deduct those contributions on your taxes. This approach, however, requires more effort than automatic payroll deductions.

2. Transfer funds to a better HSA.
Continue contributing via your employer, then periodically transfer money to another HSA with better offerings. Transfers have no tax implications and can be done multiple times a year.

3. Roll over funds to a different HSA.
This works like a transfer, but you temporarily receive the funds yourself and must redeposit them within 60 days. Only one rollover is permitted every 12 months, and missing the deadline counts as an early withdrawal—with a 20% penalty if you're under 65.

Source: AP