Morningstar Magazine - October/November 2017 - 43

offered by Vanguard in the four core asset
classes. Passive strategies represent 65% of the
plan's fund choices, which is significantly
more than all other providers. The plan tacks
on more fees than any other provider we evaluated,
charging a maintenance fee of $47.40 per year
plus an investment fee of 40 basis points.
Still, thanks to extremely low underlying fund fees,
the plan's total expenses land well below the
median charged by retail mutual funds.
The HSA Authority, Optum Bank, and Bank of
America offer a mix of active and passive
strategies within the core asset classes. The plans'
underlying fund fees across the four areas
range from 0.44% to 0.58%. The HSA Authority
charges $36 a year in dollar-based fees, translating
to an expense ratio of 0.24% assuming a $15,000
investment, which is lower than most plans. Bank
of America charges $54 in annual fees, and
Optum charges $69. The plans' expenses look less
attractive than the other two plans with positive
price ratings, but overall the options are still priced
below average versus the median retail fund.
Neutral
With average total expense ratios across the
four core asset classes equal to about
1.2%, which includes underlying fund, investment,
and maintenance fees, both HealthSavings
Administrators and SelectAccount have fees that
are comparable to retail mutual funds. As a
result, the plans receive neutral price scores.
HealthSavings Administrators charges reasonable
underlying fund fees, but it adds a hefty $45
annual maintenance fee. Plus, investors
who select MFS, DFA, Vanguard, Franklin
Templeton, or the Investor Select lineup of funds
must pay an additional 25 basis points annually.
SelectAccount uses predominantly active
managers, so its underlying fund fees run relatively
high. The plan charges an $18 investment
fee, and maintenance fees can range from $0 to
$48. However, to have access to the plan's
investment options, investors must pay at least $12
per year in maintenance fees, bringing the plan's
minimum total annual fee to $30.
Negative
Alliant Credit Union, HSA Bank, and BenefitWallet
look unattractive from a fee standpoint. HSA

Bank and BenefitWallet have average
expense ratios of 0.99% and 0.95%, respectively,
across the four asset classes. Alliant Credit
Union's underlying funds fees look more
reasonable, at 0.85%. Nonetheless, all three
plans charge hefty dollar-based fees. Each
plan layers on between $54 and $77 a year in
maintenance and investment fees. That's
equivalent to an additional 0.36% and 0.51% on top
of underlying fund expenses, assuming a
$15,000 investment, which is a tough hurdle for
active managers to consistently overcome.
Performance

To evaluate the performance of HSA plans,
we assessed the Morningstar Ratings assigned to
plans' underlying funds. The Morningstar
Rating for funds, commonly referred to as the star
rating, is a backward-looking metric that
brings together the performance and risk of a
fund relative to its peers into one quantitative
evaluation. We calculated the average overall star
rating of each plan's underlying funds to
determine performance scores. Plans with an
average star rating of 3.5 or greater receive
positive performance scores, and plans with an
average star rating between 2.5 and 3.5 earn
neutral performance scores. An average star rating
of 2.5 or less would merit a negative performance
score, but no plan fell to that threshold.
Positive
Six plans earned a positive performance score.
HealthEquity and The HSA Authority have average
star ratings of more than 4. The plans use
more passive strategies than all other providers we
evaluated, with index options representing
65% of options at HealthEquity and 38% of
investments at The HSA Authority. That has led to
strong results, as active funds have struggled
to outperform their index counterparts during the
past several years. Optum Bank and Bank of
America, which earn average star ratings of 3.88
and 3.67, respectively, have also benefited from
significant usage of index strategies, which
represent about one fourth of the fund roster at
each plan. HealthSavings Administrators and
BenefitWallet have come out ahead by selecting
well-performing active managers; less than
15% of each plan's underlying managers follow
passive strategies.

Neutral
Alliant Credit Union, HSA Bank, and SelectAccount
have respectable though not standout results,
earning neutral performance scores. The three
plans' average star ratings fall below the 3.5-star
threshold required to receive a positive
performance score.
Just a Start
Interest in HSAs is growing. Assets in HSA plans

have nearly doubled during the past three
years. At the end of 2016, there was more than
$37 billion in HSA plans. Still, investors are
just now getting up to speed on how HSAs work.
Unfortunately, investors have few resources
available to them to navigate the hundreds of plan
providers that exist.
This report is only a start, and based on
our findings, there is much room for improvement
across the industry. Out of the 10 prominent
plans we evaluated, only The HSA Authority looks
compelling for use as both a spending vehicle
and an investment vehicle-two important
reasons why a person would use an HSA. On
the spending side, only three plans earned positive
assessments. For use as an investment vehicle,
only four plans earned positives.
We hope that by shining a light on the
components of HSAs, we will encourage plan
sponsors to improve their offerings. K
Leo Acheson, CFA, is a senior analyst with Morningstar
Research Services.
Jake Spiegel is a senior analyst with Morningstar
Research Services.
Heather Larsen is an associate analyst with Morningstar
Research Services.

global.morningstar.com/Morningstarmagazine

43


http://global.morningstar.com/Morningstarmagazine

Table of Contents for the Digital Edition of Morningstar Magazine - October/November 2017

Contents
Morningstar Magazine - October/November 2017 - Cover1
Morningstar Magazine - October/November 2017 - Cover2
Morningstar Magazine - October/November 2017 - 1
Morningstar Magazine - October/November 2017 - 2
Morningstar Magazine - October/November 2017 - Contents
Morningstar Magazine - October/November 2017 - 4
Morningstar Magazine - October/November 2017 - 5
Morningstar Magazine - October/November 2017 - 6
Morningstar Magazine - October/November 2017 - 7
Morningstar Magazine - October/November 2017 - 8
Morningstar Magazine - October/November 2017 - 9
Morningstar Magazine - October/November 2017 - 10
Morningstar Magazine - October/November 2017 - 11
Morningstar Magazine - October/November 2017 - 12
Morningstar Magazine - October/November 2017 - 13
Morningstar Magazine - October/November 2017 - 14
Morningstar Magazine - October/November 2017 - 15
Morningstar Magazine - October/November 2017 - 16
Morningstar Magazine - October/November 2017 - 17
Morningstar Magazine - October/November 2017 - 18
Morningstar Magazine - October/November 2017 - 19
Morningstar Magazine - October/November 2017 - 20
Morningstar Magazine - October/November 2017 - 21
Morningstar Magazine - October/November 2017 - 22
Morningstar Magazine - October/November 2017 - 23
Morningstar Magazine - October/November 2017 - 24
Morningstar Magazine - October/November 2017 - 25
Morningstar Magazine - October/November 2017 - 26
Morningstar Magazine - October/November 2017 - 27
Morningstar Magazine - October/November 2017 - 28
Morningstar Magazine - October/November 2017 - 29
Morningstar Magazine - October/November 2017 - 30
Morningstar Magazine - October/November 2017 - 31
Morningstar Magazine - October/November 2017 - 32
Morningstar Magazine - October/November 2017 - 33
Morningstar Magazine - October/November 2017 - 34
Morningstar Magazine - October/November 2017 - 35
Morningstar Magazine - October/November 2017 - 36
Morningstar Magazine - October/November 2017 - 37
Morningstar Magazine - October/November 2017 - 38
Morningstar Magazine - October/November 2017 - 39
Morningstar Magazine - October/November 2017 - 40
Morningstar Magazine - October/November 2017 - 41
Morningstar Magazine - October/November 2017 - 42
Morningstar Magazine - October/November 2017 - 43
Morningstar Magazine - October/November 2017 - 44
Morningstar Magazine - October/November 2017 - 45
Morningstar Magazine - October/November 2017 - 46
Morningstar Magazine - October/November 2017 - 47
Morningstar Magazine - October/November 2017 - 48
Morningstar Magazine - October/November 2017 - 49
Morningstar Magazine - October/November 2017 - 50
Morningstar Magazine - October/November 2017 - 51
Morningstar Magazine - October/November 2017 - 52
Morningstar Magazine - October/November 2017 - 53
Morningstar Magazine - October/November 2017 - 54
Morningstar Magazine - October/November 2017 - 55
Morningstar Magazine - October/November 2017 - 56
Morningstar Magazine - October/November 2017 - 57
Morningstar Magazine - October/November 2017 - 58
Morningstar Magazine - October/November 2017 - 59
Morningstar Magazine - October/November 2017 - 60
Morningstar Magazine - October/November 2017 - 61
Morningstar Magazine - October/November 2017 - 62
Morningstar Magazine - October/November 2017 - 63
Morningstar Magazine - October/November 2017 - 64
Morningstar Magazine - October/November 2017 - 65
Morningstar Magazine - October/November 2017 - 66
Morningstar Magazine - October/November 2017 - 67
Morningstar Magazine - October/November 2017 - 68
Morningstar Magazine - October/November 2017 - 69
Morningstar Magazine - October/November 2017 - 70
Morningstar Magazine - October/November 2017 - 71
Morningstar Magazine - October/November 2017 - 72
Morningstar Magazine - October/November 2017 - 73
Morningstar Magazine - October/November 2017 - 74
Morningstar Magazine - October/November 2017 - 75
Morningstar Magazine - October/November 2017 - 76
Morningstar Magazine - October/November 2017 - 77
Morningstar Magazine - October/November 2017 - 78
Morningstar Magazine - October/November 2017 - 79
Morningstar Magazine - October/November 2017 - 80
Morningstar Magazine - October/November 2017 - 81
Morningstar Magazine - October/November 2017 - 82
Morningstar Magazine - October/November 2017 - 83
Morningstar Magazine - October/November 2017 - 84
Morningstar Magazine - October/November 2017 - 85
Morningstar Magazine - October/November 2017 - 86
Morningstar Magazine - October/November 2017 - 87
Morningstar Magazine - October/November 2017 - 88
Morningstar Magazine - October/November 2017 - 89
Morningstar Magazine - October/November 2017 - 90
Morningstar Magazine - October/November 2017 - 91
Morningstar Magazine - October/November 2017 - 92
Morningstar Magazine - October/November 2017 - 93
Morningstar Magazine - October/November 2017 - 94
Morningstar Magazine - October/November 2017 - 95
Morningstar Magazine - October/November 2017 - 96
Morningstar Magazine - October/November 2017 - Cover3
Morningstar Magazine - October/November 2017 - Cover4
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2021q2
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2021q1
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2020q4
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2020q3
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2020q2
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2020q1
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2019winter
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2019fall
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2019summer
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2019spring
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20191201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20181011
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20180809
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20180607
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20180405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20180203
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20181201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20171011
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20170809
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20170607
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20170405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20170203
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20171201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20161011
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20160809
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20160607
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20160405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20160203
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20161201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20151011
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20150809
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20150607
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20150405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20150203
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20151201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20141011
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20140809
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20140607
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20140405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20140203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20141201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20131011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20130809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20130607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20130405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20130203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20131201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20121011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120405
https://www.nxtbook.com/nxtbooks/morningstar/investorconference2012
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20121201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20111011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20111201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20101011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100809_lincoln
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100607_lincoln
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100405_lincoln
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20101201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20091011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20090809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20090607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20090405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20090203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008fall
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008summer
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2007spring
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2007fall
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2007summer
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008spring
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008catalog
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008winter
https://www.nxtbookmedia.com