Understanding HSA asset transfers — and tips to ensure a smooth process for your employees

There are any number of reasons why an employer may choose to move their Health Savings Accounts (HSAs) from one administrator to another — factors like cost, service and support, connection with retirement accounts, simplified administration and investment options can all play a role.

Once a new administrator has been selected, the next big step is the actual transfer of employee HSA assets from the old administrator to the new one. The process and timeline itself will depend on a number of considerations.

HSA asset transfer options

How HSA assets are transferred to a new administrator is driven by the policies and procedures of the previous administrator. It’s important for the employer to meet with both the previous and new administrators to clarify the process, set expectations and ensure all parties involved are in alignment.

Typically, there are two ways to initiate the asset transfer process:

• Electronic consent: The previous administrator may allow employees to provide consent for the transfer electronically. This consent form can be hosted on either the previous or the new administrator’s website.
• Paper form: With this option, employees who want to transfer their HSA funds to a new administrator must fill out a paper transfer form. The form may be provided by the previous administrator, or they may require the employee to fill out a form from the new administrator and send it to the previous one.

Which option is best? Things to keep in mind

While the way HSA assets can be transferred depends largely on what the previous administrator will allow, it’s important to understand what their desired process may mean for the employer and employees. In particular, paper forms often result in more work for everyone involved. The employee needs to find or be sent the form to fill out, and then it falls on the employer to follow up with employees to ensure the forms have been completed and submitted on time.

It’s easier to get employees engaged and participating in the transfer with electronic consent. And it may ultimately mean less administrative effort for the employer.

The advantages of consolidating HSAs for employees

There are several reasons why an employer may recommend HSA consolidation to their employees:

1. Simplicity: By consolidating their HSAs into one account, employees don’t have to keep track of balances in multiple accounts, and they won’t have multiple sets of tax documents after the transition year. It’s also simpler to track expenses and balances with one account, one debit card, and one mobile app.
2. Fees: If an employee chooses not to transfer their HSA assets, the HSA becomes what’s known as a “retail account” with the previous administrator. Admin fees — which were most likely paid by the employer — will now be deducted directly from the HSA, which can erode the account balance over time. Also, the fees will typically be much higher for the individual than they were when they were paid by the employer.
3. Closure due to inactivity: If there’s no account activity for a certain amount of time, and/or the account balance drops below a certain threshold, the previous administrator may close the HSA.
4. Inability to meet investment thresholds: To have the option to invest their HSA assets, the employee must have a certain balance in their account. If they have multiple accounts, they may not have enough money in any of them to reach the investment threshold. By consolidating their HSA assets in one account, the employee’s balance may be high enough to start investing.
5. No employer support: If an employee has any issues with their HSA through the previous administrator, they will not have access to any support from their employer because the HSA program has moved to a new administrator.
6. No pre-tax contributions via payroll deductions: If an employee continues contributing to their old HSA, they must do it via direct, post-tax payments to the previous administrator, rather than via pre-tax payroll deductions.

How our HSA asset transfer process works

Leveraging decades of retirement vendor transitions experience, Voya has brought various aspects of the retirement conversion process to the business of HSAs, creating best practices that facilitate a smooth and efficient transfer process for both employers and employees:

• At the beginning of the process, we ask the employer to complete a detailed questionnaire, which helps set expectations and timelines, and deliver favorable outcomes.
• Our dedicated service model helps ensure a streamlined process with personalized implementation.
• To help reduce employee confusion and administrative burden, we provide custom email communications for employers to communicate the transfer process to employees, including key instructions and dates.

To learn more about Voya HSAs and how we can help you simplify the asset transfer process, contact your Voya representative today.