Minimizing fees with Saturna HSA

This year I became eligible to contribute to a Health Savings Account (HSA). After reviewing many web resources, including

I shortlisted three HSA provider options:

  1. The HSA Authority
  2. Lively HSA : LINK to Boglehead discussion.
  3. Saturna HSA : LINK to Boglehead discussion.

Selection Criteria

My primary purpose of having the HSA is for investing. My HSA provider selection criteria include

  • No wrap fees. Any HSA with wrap fee is a non-starter for me. HSAs that have wrap fees are eliminated and not considered.
  • First dollar investing. Several HSAs require you to keep a certain amount of money in a (usually) low paying savings account before you can invest your money or to waive their fees. The amount of money could range from $1,000 to $5,000. To me, this is a “cash drag penalty” on investments. If we assume a yearly portfolio return of 5% to 6%, the “implicit fee” in having each $1,000 kept in cash could be like $50/year. If we do not put a value to the implicit fee, we would not realize how huge this fee could be. For example, HSA Bank offers to waive the total $5.50/month fee if $5,000 is kept in cash. Seriously? The implicit fee for this is like $250/year.
  • Access to low cost funds. I give preference to HSAs with funds that have low expense ratios.
  • Low fees. The lower the monthly or yearly maintenance or account fees, the better.

The HSA Authority

  • First dollar investing.
  • $36/year fee to invest in mutual funds. Investment options include Vanguard S&P500, TSM (both with ER 0.04%), Emerging Mkts (ER 0.14%), EAFE (ER 0.17%), short term bond index (ER 0.07%). Other options include SmallCap, MidCap, TIPS, REIT and Lifestrategy funds from Vanguard.

Lively HSA

  • First dollar investing.
  • $2.50/month for access to TD Ameritrade’s brokerage, with >100 commission-free ETFs (including Vanguard ETFs). Fee apparently is paid from outside the HSA (good).
  • CON: brand new startup.

Saturna HSA

  • First dollar investing.
  • Mutual funds and ETFs are available through their brokerage. Transaction fees: $0 for NTF mutual fund trade, $14.95 for each ETF/stock trade, $24.95 for Vanguard or Fidelity mutual fund trade. LINK to the list of NTF funds at Saturna.
  • Requires a minimum of one transaction per calendar year. Otherwise there is a yearly $25 inactivity fee, which is reduced to $12.50 if the account only holds mutual funds.
  • CON: Lengthy application forms which must be sent in through snail mail.

After reviewing and reminding myself that I would probably be making only one transaction a year, I decided to go with Saturna. However, if I would be making more than one transaction a year, Lively and The HSA Authority are probably better choices.

Fee minimization strategy

Using Saturna, and limiting to one ETF trade a year, the HSA running cost is $14.95/year. However, I realized that by bunching ETF purchases to once every two years, I can save on commission fees even more. The following is one such strategy:

  • Year One: Invest the entire Year One HSA contribution into T.Rowe Price’s S&P 500 index fund PREIX (ER 0.21%). This is a NTF fund (no trade fee, $2,500 minimum, 6-month holding period).
  • Year Two (January): Sell all PREIX, add the proceeds to Year Two contribution and purchase the Schwab International Equity ETF SCHF (ER 0.06%) for a $14.95 trade fee.
  • Year Three (January): Put the entire Year Three contribution and any SCHF dividends into PREIX. Make no change to SCHF.
  • Year Four (January): Sell all PREIX, add the proceeds and any SCHF dividends to Year Four contribution and purchase more SCHF for a $14.95 trade fee.
  • And so on.


  • Because the NTF fund PREIX has a higher expense ratio compared to the equivalent products from Vanguard or Schwab, there is an implicit fee in using PREIX. Assuming Vanguard’s US LargeCap ETF has an ER of 0.05%, this implicit fee is an ER difference of 0.21% – 0.05% = 0.16%. This fee is applicable one out of every two years (years 1, 3, 5 etc.) and is roughly limited to the yearly contribution amount of around $6,800. So on average, this fee is about 0.5 x 6,800 x 0.0016 = $5.44 / year (this fee could be a little higher, depending on the growth of the fund).
  • The ETF trade fee of $14.95 happens once every other year. On average, this fee is $7.48 / year.
  • Schwab’s SCHF was chosen because it only distributes its dividends once a year in December. In January, this dividend gets invested. On the other hand, if I were to use Vanguard’s VEA or VOO, I would have to deal with Q1, Q2 and Q3 dividend distributions.There is a fee to reinvest dividends from ETFs.
  • There is no fee to automatically reinvest dividends for PREIX.
  • It might appear that I am changing my asset allocation between US LargeCap and EAFE equity every year. In reality, I can make compensating trades in my other tax-advantaged IRAs to account for these changes.
  • There is a transaction every year, meeting the account activity requirement.


The total fee using the above Saturna HSA strategy is approximately $5.44 + $7.48 = $12.92/year. This is lower than either Lively’s $30/year or The HSA Authority’s $36/year.


  1. HSAnewbie

    Clever! So, in the boglehead discussions, I don’t recall seeing comments about the fees for ETF dividend reinvestment…is this just the case for Saturna? or TD Ameritrade for Lively, too? And that begs the next question…are there any worthy ETFs that only give dividends annually? If there are, than that annual dividend, plus the annual contribution, could be done once a year, for $14.95, and though that is more than your $12.92/year, it would be a lot less work.

  2. indexfundfan (Post author)

    Saturna charges a fee of $1 per instance to reinvest a stock or ETF. If using Lively/TD Ameritrade, you are free to reinvest with no fee using ETFs on their commission-free trading list.

    As far as I know, all worthwhile US equity ETFs distribute dividends quarterly.

    Schwab distributes dividends from international ETFs once a year. Vanguard used to do that for international ETFs too, but changed recently.

  3. Steve

    Does the 6 month holding period reset after each subsequent purchase into the same fund, or is it 6 months after the fund has first been purchased (regardless of any subsequent purchases)?

    Also, some funds have an additional 90 day early redemption penalty, so it might be worthwhile to disable auto re-investing of dividends 90 days prior to liquidating the fund.

  4. Tim

    Wouldn’t you be out of the market for a few days while the sale of the mutual fund is settling? This alone could cost $100.

  5. Reggie

    I’m not sure if this strategy is cheaper.

    Wouldn’t you be out of the market for at least 1 day while the sale of the mutual fund is settling?

    A 1% increase in price the next day would already be a ~$60+ loss in your strategy. Maybe you get lucky and the price falls, but the odds are stacked against you.


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