Should I sign this waiver?

February 14, 2016 8:55 AM

Each year, my employer funds my HSA; my current balance is significantly higher than my yearly out of pocket limit, and so I would like to put a portion of it into mutual funds. The institution where my funds are, ubt.com, has HSA mutual funds but they require that I sign a certain waiver.

The waiver text (PDF page 17 bottom) reads:

Waiver of Conflicts of Interest
The undersigned also hereby waives any claims or causes of action related to self-dealing or conflicts of interest in the engagement of the Trustee or any of its affiliates to provide the services and activities as described in this notice.

Verbally, someone at the bank stated that the purpose of the waiver is to e.g., allow a bank employee to invest in the same mutual fund that I would invest in, and to allow the company that actually maintains the mutual funds to compensate my bank.

Are waivers like this common in HSA mutual funds? How much stock should I put in this verbal claim about the purpose of the waiver? And, finally, should I sign this waiver to get my money into a mutual fund that otherwise fits my investment preferences, or should I skip it and leave the money collecting way under 1% yield in a traditional savings account?

posted by jepler to Work & Money (6 answers total)

The more important thing is for you to figure out the fees you'll be charged. Otherwise I'd sign the waiver. Basically it lets the MF company pay the bank for raising assets for them.

The nice thing is that if the investment options are expensive you can change HSA custodians on your own to someone like vanguard. You still have to contribute to your firm's provider, but once it's in it can be moved.

It would be silly to not take advantage of the tax deferral over this.
posted by JPD at 9:43 AM on February 14, 2016

The institution where your funds are held is governed as a fiduciary and there are very strict laws in place around fiduciaries and self-dealing, which is considered a conflict of interest*. Like JPD said, it has to do with fees that the mutual funds pay to the bank. This will come out of the fees you're paying on the fund (all funds have fees, some are higher than others). Keep an eye on the fees of each fund you pick and try to find the lowest ones you can find within whatever funds are appropriate for you.

If you can switch providers you will likely have access to a much wider range of funds, many of them much lower cost.

* due to the current mismash of regulatory agencies in the US, not every place that sells mutual funds is considered a fiduciary - a fiduciary is the highest standard of care. So there are places that can sell you these funds as long as they believe they're suitable for your circumstances, without consideration of cost. This may not apply to your HSA, just want to make clear that this isn't a universal standard.
posted by triggerfinger at 10:15 AM on February 14, 2016 [1 favorite]

Also, to answer your questions, I'm guessing these waivers aren't all that uncommon (though I have little experience specifically with HSA mutual fund accounts). If it were me, I would sign the waiver and, 1) check to see if I can move my HSA to Vanguard/Charles Schwab/Fidelity/some other low cost provider, or, 2) invest in the lowest cost funds at the current provider if I were unable to switch.

I agree that it's a great tax deferral option that should be taken advantage of as much as possible if you can.
posted by triggerfinger at 10:21 AM on February 14, 2016

Response by poster: The mutual fund fees are worse than at a Vanguard, of course, but what can you do?
posted by jepler at 11:08 AM on February 14, 2016

The nice thing is that if the investment options are expensive you can change HSA custodians on your own to someone like vanguard.

Vanguard does not provide custodian services for HSA accounts. However, you can find other HSA custodians that allow you to buy Vanguard mutual funds.

The really important factor are the fees charged by the custodian and the fees charged by the investments they offer. You have to deposit your contributions into your employer's selected custodian, but as JPD says, you can then immediately transfer your money to an HSA custodian of your choice, perhaps one that offers Vanguard funds.

On the other hand, if you are generally spending most of your contributions to cover out of pocket expenses each year, the amount of fees may not be very significant and worth the hassle of switching custodians.
posted by JackFlash at 11:15 AM on February 14, 2016

You don't have to leave your HSA funds at ubt.com if you don't like their expenses or that waiver. You can do a trustee-to-trustee to transfer to move your money to a different HSA trustee. As always for financial things, I suggest visiting bogleheads to learn more about low-cost HSA custodians for investment and how to do the transfer.
posted by medusa at 11:10 AM on February 15, 2016