Long before health savings accounts became popular, two large record keepers began offering them well ahead of their peers.
Bank of America, New York, in 2004, and Fidelity Investments, Boston, in 2006, not only provided HSAs but, unlike other record keepers, offered their own versions rather than rely on an HSA specialty company.
"We are an integrated benefits provider," said John Quinn, the Hopewell, N.J.-based head of product and platforms for institutional retirement for Bank of America. "An HSA is an important part of a benefits plan for a company."
Bank of America provides HSAs to 4,200 sponsors. Of its 900,000 HSA accounts, approximately one-fourth are individual accounts, such as self-employed workers who are covered by a high-deductible health-care plan. Mr. Quinn declined to discuss HSA assets under administration.
Among all of its sponsor clients that offer HSAs, 25% of participants use them. "This is still an area in the industry that needs improvement," Mr. Quinn said. "There's an education gap."
Mr. Quinn said his company sets a $1,000 threshold for HSA participants before they can invest to provide some cushion for health expenses. About 25% of HSA clients' accounts are devoted to investments.
Bank of America offers a target-date series and 28 other mutual funds to its HSA clients as a core lineup with a mixture of active and passive institutionally priced investments. Bank of America, which uses an open architecture approach, allows certain clients to customize their investment lineups.
Bank of America's Merrill Lynch division handles trade execution. The Bank of America chief investment office provides investment oversight.
Fidelity has 567 plan sponsor clients, covering 1.04 million participants. Total HSA assets were $4.13 billion by year-end 2018. Approximately 25% of assets in HSA accounts are investments.
To expand its services, Fidelity announced in February it would begin offering its HSA to small- and midsize employers — defined by the company as employers with 1,500 or fewer workers. In November, it opened its HSA to individuals who may not have access to an HSA through their employers.
The company reported that 91% of HSA account holders keep all of their funds in cash. "This is definitely one of the challenges for the industry," said Begonya Klumb head of HSA for the Fidelity health-care group.
Fidelity has introduced an auto-invest feature in which participants designate a specific target amount for expected short-term medical expenses. Any amounts above this coverage will be invested.
Fidelity doesn't set a threshold on the amount of money an HSA account holder must have before making investments.
Fidelity offers two choices for its HSA investment lineup. Account holders can have access to a self-directed brokerage with more than 10,000 choices or can choose a Fidelity-curated list of 25 investments, which combines passive and active mutual funds as well as proprietary and non-proprietary products. The company doesn't customize its HSA investments to individual employers.