BOSTON--(BUSINESS WIRE)--Fidelity Investments® , one of the industry’s most diversified financial services firms, today announced record growth of its health savings account (HSA) business. Since the beginning of 2019, Fidelity has added 295 new employers that now provide HSAs to their employees (a 52% year-over-year increase). The firm has more than doubled the number of HSAs under administration in the past three years, which now includes 1,476,000 individual funded account holders representing $6.68 billion in assets (a 62% increase since the beginning of 2019)1.
This significant growth reflects the firm’s ongoing efforts to broaden access to the value and benefit of these triple tax-advantaged2 accounts in new ways.
- Fidelity recently announced new availability of the industry’s only full-service HSA for financial intermediaries3, enabling advisors to meet growing demand from their clients to save and invest in their long-term well-being in a highly tax efficient way.
- Fidelity’s direct to consumer HSA offering, launched in the fall of 2018 and named best HSA for both spenders and investors in the Morningstar® 2019 Health Savings Account Landscape report4, saw tremendous growth this past year, more than tripling the number of funded accounts (72K), and growing assets by almost 300% ($807M)5.
“As health care expenses continue to rise and are a leading concern for both employers and individuals, the ability of an HSA to help grow and stretch savings dollars is invaluable in planning for both current and future health care needs,” said Begonya Klumb, head of HSA at Fidelity. “Our goal is to provide clear education, simplified options and decision support that enables our customers to maximize account benefits, grow their savings and feel confident they’re on track for the future.”
- Over the past year, Fidelity also continued to introduce new enhancements and guidance resources to help HSA owners make the most of every savings dollar, adding:
- Ability to maximize savings held in cash. Fidelity now offers two choices for HSA owners’ core cash position, the FDIC-sweep, which is the standard practice within the HSA industry, and now a higher-yielding money market fund option, Fidelity Government Cash Reserves (FDRXX). Recognizing that over 65% of Fidelity HSA assets are not invested6, and that most HSAs industrywide do not offer money market funds as a core cash position choice, Fidelity introduced this new sweep option, offering account owners a further opportunity to help grow their savings.
- Simplified payment options, with direct debit functionality and a new debit card that gives users immediate access to funds in their HSA or other flexible benefit funds to which they have access through an employer – such as a Flexible Spending Account (FSA), Limited Purpose Flexible Spending Account (LPFSA) or Health Reimbursement Arrangement (HRA) – all with one card.
- Fidelity’s HSA Investment Review tool helps HSA owners determine first how to allocate HSA savings between transactional cash needs and medium-to-long term investing, and then how to invest contributions beyond their cash target, based on their individual investment profile and goals.
New Fidelity Health Savings Funds, the Industry’s First Designed Specifically for Investing in HSAs Offer Simple, Low-Cost Investment Options
While the ability to invest contributions for potential growth, tax-free, is one of the most valuable aspects of an HSA, it is also one of the most underutilized. In fact, more than half of HSA owners don’t even realize they can invest their contributions.7 At the end of 2019, just 12.4 percent of Fidelity HSAs were invested. Though this figure is more than double the industry average8, and an increase from 8.8 percent at the end of 2018, this still represents a significant missed opportunity for those with cash balances intended to be used for future health expenses.
To encourage more HSA owners to get invested, Fidelity has launched two health savings mutual funds, the first in the industry that are specifically designed for those looking to grow their HSA savings to meet future medical expenses. The Fidelity Health Savings Fund (available both in a retail share class, FHLSX, and K share class, FHLKX) and Fidelity Health Savings Index Fund (FHSNX) both leverage the deep expertise of the firm’s Global Asset Allocation Team to deliver an innovative strategy designed to balance growth and downside market protection through different market environments to address the inherently uncertain timing of future medical expenses. The funds are competitively priced, as shown in the table below, with annual expenses that compare favorably with the industry average net prospectus expense ratio of 79 basis points for similar asset allocation funds, according to Morningstar9.
(in basis points)
Fidelity® Health Savings Fund (FHLSX)
47 basis points
Fidelity® Health Savings Fund (FHLKX)
37 basis points
Fidelity® Health Savings Index Fund (FHSNX)
17 basis points
The funds are exclusively available for purchase by those with a Fidelity HSA, including individual investors, employees in workplace savings plans for which Fidelity is the recordkeeper, and clients of financial intermediaries that are Fidelity Custody and Clearing clients.
“The Fidelity Health Savings Funds build on our decades of experience and expertise in asset allocation, as well as the cost efficiencies of our extraordinary scale, to offer our HSA customers innovative, low-cost investment options that simplify the complexity of investing their savings to meet uncertain future medical expenses,” said Vadim Zlotnikov, president of Global Asset Allocation at Fidelity. “Our goal with these new funds is to encourage more savers to take that next step and invest the HSA assets they intend to use for future healthcare expenses, and by doing so, more fully benefit from the great advantages of their accounts, which include the potential for tax-free growth.”
The new funds are both co-managed by Avishek Hazrachoudhury and Geoff Stein and are available now to all Fidelity HSA clients.
Other HSA Investment Options
In addition to its new Fidelity Health Savings Funds, Fidelity offers an unparalleled menu of investment options to meet the needs of different types of investors, including access to its brokerage platform which offers more than 10,000 investment options.
For those who want a “do-it-myself” approach, but seek a simplified set of options, Fidelity offers the Fidelity HSA Funds to Consider, a curated list of 22 active and passive fund options, with zero account minimums.
For additional decision support, Fidelity offers both digital investment review tools and professionals available 24/7 online or by phone to provide guidance. Regardless of the investment path an account holder chooses, there are no account transaction fees11 or minimum balance to start investing12.
More Resources to Understand and Plan for Health Care Expenses
Even among those who are enrolled in an HSA, there are still knowledge gaps and opportunities to educate people on contributing, spending, and saving in an HSA. To help address this, Fidelity’s new online hub answers the most frequently asked questions and prevalent misconceptions about HSAs and HSA-eligible health plans. Also available are interactive tools including a health care costs calculator and an HSA “worksheet” to help jump start planning.
To help individual savers and employers learn more about planning and saving for health care, Fidelity has a library of additional resources, including: 3 healthy habits for health care savings accounts; How to plan for rising health care costs; 5 ways HSAs can fortify your retirement; How to talk to your doctor – and save money; Your bridge to Medicare; 6 key Medicare questions; Fidelity’s Pulse on Health Care; A Year in the Life of an HSA.
For more insights on how Fidelity workplace HSA clients utilize their accounts, see the 2020 HSA Fact Sheet.
About the Fidelity Health Savings Funds
The Fidelity Health Savings Fund (FHLSX, FHLKX) and Fidelity Health Savings Index Fund (FHSNX) are both designed to assist investors in saving for future eligible medical expenses. Because the time horizon of such expenses is inherently uncertain, the funds pursue an asset allocation strategy that is designed to balance growth and downside market protection through different market environments.
Fidelity Health Savings Fund
Fidelity Health Savings Fund invests primarily in a combination of both actively and passively managed Fidelity bond and equity funds and affiliated and unaffiliated exchange-traded funds.
Fidelity Health Savings Index Fund
Fidelity Health Savings Index Fund invests primarily in a combination of passively managed Fidelity bond and equity funds and affiliated and unaffiliated exchange traded funds.
About Fidelity Investments
Fidelity’s mission is to inspire better futures and deliver better outcomes for the customers and businesses we serve. With assets under administration of $8.4 trillion, including discretionary assets of $3.2 trillion as of January 31, 2020, we focus on meeting the unique needs of a diverse set of customers: helping more than 32 million people invest their own life savings, 22,000 businesses manage employee benefit programs, as well as providing more than 13,500 financial advisory firms with investment and technology solutions to invest their own clients’ money. Privately held for more than 70 years, Fidelity employs more than 40,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.
Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.
Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.
Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal.
Investing in bonds involves risk, including interest rate risk, inflation risk, credit and default risk, call risk, and liquidity risk.
You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Fidelity Investments and its affiliates, the fund’s sponsor, have no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time. The fund will not impose a fee upon the sale of your shares or temporarily suspend your ability to sell shares if the fund’s weekly liquid assets fall below 30% of its total assets because of market conditions or other factors.
In identifying investment options to include in this material, Fidelity only considered Fidelity open-end mutual funds and open-end mutual funds offered by a limited universe of third-party fund companies that participate in an exclusive marketing, engagement and analytics program with Fidelity for which they pay Fidelity an annual fee. The only third-party fund companies whose funds were eligible for this program were companies that generally have a track record of generating the strongest customer demand for their products from across Fidelity's customer channels and have been paying Fidelity a sufficient level of compensation for the shareholder servicing performed by Fidelity. Fidelity applied the following process when selecting among the considered funds:
Fidelity Brokerage Services LLC, Member NYSE, SIPC 900 Salem Street, Smithfield, RI 02917
Fidelity Distributors Company LLC, 500 Salem Street, Smithfield, RI 02917
National Financial Services LLC, Member NYSE, SIPC, 200 Seaport Boulevard, Boston, MA 02110
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1 Fidelity record kept data of HSAs through January 31, 2020
2 With respect to federal taxation only. Contributions, investment earnings, and distributions may or may not be subject to state taxation.
3 Fidelity offers the only full-service, open architecture HSA broadly available for intermediary clearing and custody advisors. Fidelity acts as the HSA custodian, offers the robust Fidelity brokerage platform, provides all services integrated with our brokerage platform, and supports all aspects of the product without an outside firm.
4 The Morningstar 2019 Health Savings Account Landscape report evaluated 11 of the largest HSA providers. More details are available here: https://www.morningstar.com/articles/947613/our-2019- rankings-of-11-top-hsa-providers.
5 Fidelity brokerage data of HSAs through January 31, 2020
6 Fidelity record kept data of HSAs through December 31, 2019
7 Represents the findings of an online survey conducted among a demographically representative U.S. sample consisting of 4,000 adults, 18 years of age and older. Interviewing for this CARAVAN® survey was completed in October 2018, by ORC International, which is not affiliated with Fidelity Investments. Included in the analysis were 1,128 respondents enrolled in an HSA-eligible health care plan. The results of this survey may not be representative of all adults meeting the same criteria as those surveyed for this study.
8 Devenir Research 2019 Year-End HSA Market & Statistics Trends
9 Comparison based on an average of the prospectus net expense ratios for all no load funds within the Morningstar Allocation 15% to 30% Equity and Allocation 30% to 50% Equity categories
10 The annual fund expenses shown in the table above include the funds’ management fees and acquired fund fees based on an estimate for the current year. Fidelity Management & Research Company LLC (FMR) has contractually agreed to waive 0.05% of the management fee for Fidelity Health Savings Index Fund. This arrangement is reflected in the expenses for that fund shown above and will remain in effect through January 31, 2022. FMR may not terminate this arrangement before the expiration date without the approval of the Board of Trustees and may extend it in its discretion after that date.
11 Account transaction fees refers to fees for account opening, funds transfer, debit cards, excess contributions, etc. and does not include recordkeeping fees, which may be charged to employers. Employers may choose to pass recordkeeping fees on to employees.
12 There may be funds that require a minimum amount to invest, but Fidelity does not require a minimum to start investing.