As a newcomer to health savings account investing strategies, Dimensional Fund Advisors sees a significant marketing opportunity.
“I look at HSAs as where 401(k) plans were in the 1980s,” said Tim Kohn, vice president and head of defined contribution services, meaning that participants and sponsors require more education about the investment/savings opportunities with HSAs.
“Sponsors need to include the HSA message into their whole retirement message,” he said. “Communicate this as a retirement benefit plan.”
Dimensional Fund Advisors, Austin, Texas, began offering 22 investment options — from a target-date series to stand-alone equity and fixed-income funds — to HSAs in January.
One factor suppressing the growth of HSAs as an investment vehicle is that most HSA administrators are banks, Mr. Kohn said. “Most banks want a deposit — $2,000 or $3,000 or $5,000 — before they offer mutual funds.”
Dimensional offers its investment options to HSAs run by HealthSavings Administrators, Richmond, Va., and those bank-type restrictions don't apply. “HealthSavings Administrators offers "dollar one investing,' where there are no minimum AUM requirements in order to invest into a mutual fund,” he said.
Mr. Kohn's firm only provides its HSA investment options through HealthSavings Administrators. Unlike many HSA investment options elsewhere, Mr. Kohn's firm offers institutionally priced shares.
Many HSAs require participants to keep a certain amount of money in a liquidity option so they can easily draw down the money to pay for the medical expenses. Mr. Kohn said HealthSavings Administrators “offers a checking account-type interest bearing account, also with no minimum investment.”