DEFINITION of 'HSA Custodian'

Any bank, credit union, insurance company, brokerage or other IRS-approved organization that offers health savings accounts (HSAs).  Financial institutions that manage HSAs are also called HSA administrators. An HSA custodian or administrator simply holds HSA assets; the account holder directs how to use them.

BREAKING DOWN 'HSA Custodian'

An HSA custodian makes it possible for individuals to contribute to an HSA and withdraw funds as needed to pay medical bills. Custodians pay interest on cash balances, and some let account holders invest in stocks, bonds and funds to potentially earn a higher rate of return on money they don’t need to pay for medical expenses in the short term.

HSA custodians charge fees for their services. Fee types and amounts vary by custodian.  Some basic, ongoing fees you might have to pay include an annual administrative flat fee and a quarterly custodial fee calculated as a percentage of your account balance. There are also fees you can incur if you make mistakes, such as an excess contribution correction fee if you deposit more than the IRS limits to your HSA. There may also be fees to issue additional debit cards to family members or to replace lost or stolen debit cards. HSA custodians also charge many of the same fees that checking accounts charge, such as non-sufficient funds fees, account closure fees and stop payment fees.

If you open an HSA through your employer, you might be automatically enrolled with a particular HSA custodian, but you have the option to switch (before doing so, ask your HR department how this will affect payroll withdrawals to fund your HSA account). If you open an HSA on your own, your choice of custodian is entirely up to you. Your choice of HSA custodian is important because the interest you earn, the fees you pay and the investment options available can have a significant impact on your HSA balance over time. As with any financial account, you want to minimize your fees and maximize your returns. You also want to make sure your cash balances will be FDIC insured and your investments, if any, will be SIPC insured. For more information, see Investopedia's tutorial How HSAs Work.

 

RELATED TERMS
  1. Health Savings Account - HSA

    A Health Savings Account (HSA) is an account for individuals ...
  2. High-Deductible Health Plan - HDHP

    A health insurance plan with a high minimum deductible that that ...
  3. Mutual Fund Custodian

    A mutual fund custodian is a trust company, bank or similar financial ...
  4. Fee

    A fee is a fixed price charged for a specific service and is ...
  5. Impose

    The term impose refers to the act of placing a fee, levy, tax ...
  6. Checking Account

    A checking account is a deposit account at a financial institution ...
Related Articles
  1. Managing Wealth

    How to Pick a Health Savings Account Custodian

    You have options in choosing the manager of your HSA, even if the account is through your employer. What to look for in an administrator.
  2. Financial Advisor

    IRS Sets 2016 HSA Deduction Limits

    Contribution limits for HSA plans have increased slightly for 2016. Here's a breakdown of what they are and how they work.
  3. Insurance

    Your Most Powerful Tax Shelter: Your HSA

    For those that can afford it, the HSA is a powerful tax shelter. Here's why.
  4. Retirement

    7 Tips for the Best Health Savings Account (HSA)

    You want the best health savings account you can find to cover your healthcare costs. Here are tips to help you locate one.
  5. Insurance

    Are Health Savings Accounts Useful in Retirement?

    When saving for retirement, an HSA be a tax-efficient vehicle for future healthcare expenses.
  6. Investing

    Expansion Plans Boost Health Savings Account Stocks

    With the new health law replacement expanding HSA limits, providers expect major gains going forward.
  7. Retirement

    Can You Have an HSA If You Get Medicare?

    The answer is usually no, but there are exceptions. You just have to know the rules to avoid penalties.
  8. Insurance

    Health Savings vs. Flexible Spending Accounts

    When it comes to medical expenses, there are many accounts that provide tax advantages. HSAs and FSAs are two options often offered by employers.
Hot Definitions
  1. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  2. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  3. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  4. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  5. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  6. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
Trading Center