Products June 27, 2017

Morningstar Offers Analysis of HSA Providers

Morningstar evaluated the plans through two different lenses: one, as an investment vehicle to save for future medical expenses, the other as a spending vehicle to cover current medical costs.
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“HSAs [health savings accounts] are becoming increasingly popular, but investors have few resources at their disposal to navigate the hundreds of plans available to them,” says Leo Acheson, Morningstar’s lead research analyst for HSAs.

Morningstar Inc. published a new study assessing plans from 10 of the largest HSA plan providers: Alliant Credit Union, Bank of America, BenefitWallet, HealthEquity, HealthSavings Administrators, HSA Bank, Optum Bank, SelectAccount, The HSA Authority and UMB Bank. Morningstar evaluated the plans through two different lenses: one, as an investment vehicle to save for future medical expenses and the second as a spending vehicle to cover medical costs today.

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The results of the study show room for improvement needed across the board: Morningstar positively assessed only four of the 10 plans for use as an investment vehicle and three as a spending vehicle. Moreover, only one plan received a positive assessment on both fronts.

Morningstar’s manager research group evaluated HSA plans by assigning positive, neutral and negative scores to various criteria and aggregating those scores to reach an overall assessment for each plan, both as an investment vehicle and as a spending vehicle. As an investment vehicle, a plan had to earn two positive scores and no negative scores for menu design, quality of investments, and price to earn an overall positive assessment. An overall negative assessment means a plan scored negative in two of the three areas. As a spending vehicle, an HSA plan with no maintenance fee received an overall positive assessment, while a plan that charged fees regardless of the balance received a negative assessment. Plans that landed in between received a neutral assessment.

Morningstar’s assessments are as follows:

HSA Plan Provider / Overall Assessment as Investment Vehicle / Overall Assessment as Spending Vehicle

  • Alliant Credit Union / Negative / Positive
  • Bank of America / Neutral / Negative
  • BenefitWallet / Neutral / Neutral
  • HealthEquity / Positive / Neutral
  • HealthSavings Administrators / Neutral / Negative
  • HSA Bank / Neutral / Neutral
  • Optum Bank / Positive / Neutral
  • SelectAccount / Neutral / Positive
  • The HSA Authority / Positive / Positive
  • UMB Bank / N/A / Neutral

HSA Bank is Morningstar’s HSA plan provider. UMB Bank did not provide an investment menu and was therefore excluded from the investment vehicle evaluations.

“Now that the U.S. House of Representatives and Senate have introduced health care reform bills that would double HSA contribution limits, analysis of HSA plans will become crucial as investors and policymakers strive to better understand the provider marketplace. This report provides key context to understanding the HSA as an investment vehicle but also utilizing it as a spending vehicle,” says Jake Spiegel, senior analyst for policy research.

The full research report may be downloaded here.

Compliance June 27, 2017

Washington University in St. Louis Faces Second 403(b) Lawsuit

The strongly worded complaint says the plan fiduciaries “utterly abdicated their fiduciary duties to act prudently and loyally” by turning the plan over to TIAA and Vanguard Group.
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Just weeks after being served with a lawsuit about allegedly excessive recordkeeping and investment fees for its 403(b) plan, Washington University in St. Louis is facing a lawsuit by another plan participant.

The strongly worded complaint says the plan fiduciaries “utterly abdicated their fiduciary duties to act prudently and loyally. Instead, they turned the plan over to the Teachers Insurance and Annuity Association of America and College Retirement Equities Fund (TIAA) and Vanguard Group Inc.” The complaint goes on to say that TIAA and Vanguard offered “scores of duplicative, expensive and underperforming” proprietary products.

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The lawsuit alleges that TIAA and Vanguard gained multiple layers of fees, but the plan and participants lost the potential growth they could have achieved if plan fiduciaries had properly discharged their duties under the Employee Retirement Income Security Act (ERISA).

The lawsuit says the plan participants were damaged because they paid higher recordkeeping fees than necessary as the plan fiduciaries had allowed TIAA and Vanguard to charge fees based on a percentage of assets rather than on the number of plan participants. In addition, the complaint says, for many funds, participants paid for the higher-cost, retail share class rather than the lower-share-class versions available to large investors such as the plan. It notes that the Washington University plan is one of the largest 403(b) plans in the country, with approximately 24,000 participants and $3.8 billion in assets.

The lawsuit also alleges that participants were offered an excessive number of duplicative funds, including poorly performing funds “bundled into the plan by TIAA and Vanguard mandates,” which enriched TIAA and Vanguard at the expense of plan participants.

The lawsuit seeks, on behalf of all participants in the plan, restoration of losses caused by the defendants’ breaches of fiduciary duties.

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