Establishing HSA Accounts

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Establishing HSA Accounts

HSA accounts can be opened at any willing bank, credit union, or other qualified financial institution approved by the IRS to establish HSA accounts. Banks and credit unions are not required to open HSA accounts, so don’t be surprised that your local bank or credit union does not offer HSA accounts. Insurance companies are also approved to open your account. Many insurance companies offer HSA account services through partnership with banks. This often makes it easy to get your account started. You always have the flexibility to transfer your funds to another institution of your choosing at a later date.

The custodian

The institution is the "custodian" or "trustee" of your account. By agreeing to offer HSA accounts, the custodian/trustee agrees to abide by banking laws, offer federal deposit insurance to protect your account, and report necessary tax information to you and the Internal Revenue Service.

Getting started

The general process for establishing your HSA account is very similar to the way you open an individual retirement account (IRA). You do not need permission from your employer or anyone else to establish your HSA account. However, if your employer makes contributions to your HSA account, you may end up with an account opened on your behalf.

The specific process varies from bank to bank. Generally, most trustees and custodians require that you complete an application form in writing, sign it, and return it by mail or fax. Some trustees and custodians have developed account opening processes that allow some aspects to be handled electronically.

Why you should open your account right away

It is important that you open your HSA account as soon as you enroll in an HSA-qualified plan (if not before), because your HSA can only be used to pay for or reimburse qualified medical expenses that you incur after your account is "established." This is an important and subtle rule—one that can surprise you when you enroll in an HSA-qualified plan for the first time. Typically you enroll in the HSA-qualified plan first, then open the HSA account. Many trustees and custodians allow you to complete the necessary account opening forms or other processes shortly before the date your HSA-qualified coverage becomes effective, so your account is considered "established" on your coverage effective date. As a result, any medical expenses you incur during the first few days of coverage can be paid for or reimbursed tax-free from your account.

You can open additional HSAs

You may open and maintain more than one HSA account at different financial institutions. You may deposit as much as you wish into each account as long as your total contribution to all the accounts combined does not exceed the limits for the calendar year. However, because each account custodian/trustee may charge fees, etc., it may not be wise to open too many HSA accounts.

Employers can help

If your employer makes contributions to your account or allows you to make contributions through payroll deduction, your employer can choose a financial institution at which to deposit the funds. This makes it easier for your employer to deposit the funds into your HSA account. However, you can transfer the funds to another bank or credit union if you want your account held at a different institution.