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Morningstar report names only one HSA provider high quality

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2 years ago

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Morningstar’s annual report card for the providers on the menu of so-called “triple-tax-free” health savings accounts is in, and most did not earn very high grades.

Only one HSA firm — Fidelity Investments — out of 11 reviewed by the independent investment research firm as part of its yearly “Health Savings Account Landscape” report last month got an assessment of being “high” quality for the purposes of paying for medical costs and acting as a long-term investment account. Just three others — HealthEquity, HSA Bank and Saturna — received “above average” ratings on both measures. 

First American Bank, Lively, UMB, Associated Bank, NueSynergy, Optum and Bank of America came out “average” or “below average” in covering health costs or being a long-term investment account. Importantly, Morningstar used public data and a survey, so the report noted that it was not evaluating specific employer-offered HSAs that vary based on their size and relationships with providers.

Low interest rates for client cash holdings and higher relative fees for custody and the underlying investments drove the poor grades for most of the providers, according to Greg Carlson, a senior manager research analyst for equity strategy with Morningstar and one of the authors of the report. An average expense ratio of 24 basis points on the available investment funds in the plans offered one bright spot from the report, since the decline from 29 bps last year added up to “a significant one-year decline” and “the biggest change we’ve seen,” he said.

“Part of it is Fidelity just beating everyone in terms of fees pretty much, and that’s a big advantage,” Carlson said. “They have come down across the board. Just like in other areas of asset management, competition has intensified on the fee side.”

READ MORE: IRS adjusts HSA amounts for 2025

The often-discussed advantages of HSAs from getting pretax contributions, untaxed investment returns and tax- and penalty-free withdrawals for medical purposes come with some challenges. Only high-deductible health insurance plans are eligible, every provider besides Fidelity and Lively require participants to put a minimum level of assets into the HSA before they can do any investing, and Fidelity is the only one out of the group of 11 to pay interest rates on cash assets above 1%. 

HSAs are often “sub-par regarding interest on cash balances,” said planner Autumn Knutson of Tulsa, Oklahoma-based Styled Wealth.

“HSAs are a powerful vehicle for tax-advantaged healthcare savings, but most consumers are stuck with whatever provider their employer chooses if they want to benefit from payroll deductions toward their HSA,” Knutson said in an email. “As if the nuances of understanding how to qualify for, contribute to and invest within an HSA were not tricky enough, an additional layer of complexity for HSA providers is within the interface, navigating minimum cash balance requirements and fees for other services or selections.”

HSA assets have soared by a factor of 22 between 2006 and 2023 to $123 billion as the share of workers using employer-sponsored plans that have high-deductible health insurance plans jumped from 7% to 31%. HSAs started in 2003 as an effort “to make high-deductible plans more attractive,” according to the report. 

In another finding that’s consistent with other studies but crucial to financial advisors and tax professionals working with clients who have HSAs, an average of 74% of the plan participants among surveyed providers used the accounts to cover medical expenses but didn’t take advantage of the ability to invest through them. 

The participants “may not be able to meet and maintain the minimum investment account balances most providers require” or have enough left over for stocks and bonds after paying medical bills, the report said. The average American had about $13,500 in healthcare expenses in 2022, according to Centers for Medicare and Medicaid Services figures cited by Morningstar.

“Plans have gotten better in important ways,” the report said. “Both investment and spending account fees have continued to decline, for example, and investment option quality keeps improving. HSA transparency and ease of use could still improve, though, and costs — particularly investing and custodial fees — could drop further. The process of investigating, signing up for and funding accounts remains complicated. Fewer top providers charge maintenance fees, but some still do — and they often require minimum account balances before participants can invest. Most providers also pay paltry interest rates on spending account balances below relatively lofty levels, even two years after rates began rising.”

READ MORE: HSAs should be promoted as way to supplement retirement savings

While high-deductible plan participants can use a different HSA provider than the one chosen by their employer, that one is “likely most convenient and financially advantageous” because “your contributions are deducted before Social Security and Medicare taxes,” Knutson noted. More often, the participants will move to an alternate provider once they change employers.

As for the investing side of HSAs — or the lack thereof — “some of the biggest problems I see” in the accounts are savers who are “accruing large balances and not investing the cash amounts at all,” Knutson said.

“This is a function less on the HSA provider and more on investors understanding that funds in an HSA are not invested by default, but rather need to be invested after they are contributed,” she said. “Just as 401(k)’s now have a default investment option to protect investors from having decades of funds accidentally uninvested, an idea for improving HSAs could be to have any excess beyond a planned out-of-pocket max be invested, as this would cover any expenses incurred through health insurance and allow any excess amounts saved into an HSA to be invested for longer term goals.”

Companies and lawmakers “can do more to motivate HSA participants to take advantage of their plans’ investment features,” according to the Morningstar report. 

“While employers can automatically enroll employees in employer-sponsored retirement plans, the government has not yet allowed them to do the same for employees who are eligible for HSAs. Automatic enrollment has boosted retirement plan participation,” the report said. “Another barrier to increased HSA investing is that participants sometimes aren’t aware of investment-account options. Providers could simplify the account-opening process and better teach participants both how to transfer between the two account types and about the benefits of long-term investing. Providers that offer better guidance and tools tend to have higher average investment account balances.”

In addition, Morningstar gave advisors, tax pros and their clients some best practices to seek out from their providers when using HSAs. For medical expenses, they should look for “no ongoing maintenance fees,” “competitive interest rates on account balances,” “few or no additional fees” and “FDIC insurance on the spending account.” 

When thinking about the long-term investment side of HSAs, they should find providers who have “investment menus that cover core areas and limit overlap and volatile or niche strategies,” “investment options that earn Morningstar Medalist Ratings of bronze or higher,” “low fees” and “no minimum balance in a spending account required before investing.”

READ MORE: The HSA ‘deathbed drawdown’: Making tax-efficient distributions when there isn’t much time

Advisors can guide clients through their HSA decisions with an eye toward the lowest-cost investments and an understanding that even a core bond fund could bring higher return than cash, according to Carlson. One method to lock in some intermediate and longer-term gains would be to set aside the “money you’ll need in the short term,” he said. 

“Obviously, health care costs are high and rising, so you do want to make sure that, first and foremost, you’re not taking a lot of risk with money you may need to use immediately or in the short term,” Carlson said. “You want to probably try to separate pools of money.”

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SEC’s Semiannual Reporting Proposal Faces Investor Pushback: What CFOs Need to Know

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21 hours ago

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August 25, 2026

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U.S. Securities and Exchange Commission (SEC)

A proposal from the U.S. Securities and Exchange Commission to potentially shift some public companies away from quarterly financial reporting toward a semiannual model is drawing significant pushback from investors, even as it continues moving through the regulatory process. The debate has direct implications for corporate finance teams, auditors, and the broader transparency of U.S. capital markets.

What the SEC Proposed

According to a summary published by accounting advisory firm Cohen & Co., the SEC issued a proposed rule on May 19, 2026, aimed at simplifying financial reporting requirements for many U.S. public companies. The proposal would potentially reduce the frequency of certain mandatory disclosures from quarterly to semiannual, a structural change that has not been made to core U.S. reporting requirements in decades.

The proposal follows an extended debate within U.S. policy circles, with proponents arguing that reduced reporting frequency could lower compliance costs and free up management time for longer-term strategic planning rather than quarter-to-quarter results management.

Why Investors Are Pushing Back

Comment letters submitted in response to the proposal have been extensive, and according to Cohen & Co.’s review of the public record, investors “appear to be largely opposed” to the shift, viewing frequent interim reporting as a core benefit of U.S. capital markets relative to other jurisdictions.

Accounting and law firms have taken a more measured position, generally urging any changes to remain aligned with the Financial Accounting Standards Board (FASB), whose existing disclosure requirements and guidance are built around a quarterly reporting cadence. A shift to semiannual reporting without corresponding changes to FASB guidance could create friction between SEC filing requirements and GAAP-based disclosure expectations.

Lessons From the U.K. Experience

The debate is not without precedent. The United Kingdom moved away from mandatory quarterly reporting for listed companies in 2014, returning to a semiannual disclosure requirement. According to Cohen & Co.’s analysis, that experience offers a cautionary data point: there was no measurable increase in capital expenditure or R&D investment following the change, while analyst coverage of affected companies declined as reliable interim information became less available — a particular risk for smaller and newly public companies that rely on analyst coverage to maintain investor visibility.

Practical Implications for Finance Teams

Beyond the debate over disclosure philosophy, the proposal carries practical complications. Many companies have debt covenants and credit agreements structured around quarterly financial delivery; a shift to semiannual reporting could require renegotiating those terms. Reduced reporting frequency would also extend the “window of market silence” between disclosures, a factor that governance and investor-relations teams would need to manage carefully to avoid information asymmetry.

Separately, and unrelated to the reporting-frequency debate, the SEC and FASB have continued finalizing more routine updates this year. New Accounting Standards Updates are taking effect for December 31, 2026, fiscal year-ends covering income tax disclosures, credit loss measurement, induced debt conversions, and stock compensation, according to Eide Bailly’s review of 2026 ASU activity. Additional guidance on paid-in-kind dividends and environmental credits is also on the near-term horizon.

What to Watch Next

The semiannual reporting proposal remains in the comment and review phase, and no final rule has been adopted as of this writing. Finance leaders should monitor the SEC’s regulatory agenda for further movement, while treating the current quarterly reporting requirement as the operative standard until any final rule is issued and an effective date is set.

Given the extent of investor opposition documented in the comment file, a full shift to mandatory semiannual reporting appears more likely to result in either a scaled-back compromise or continued study rather than swift adoption — though the SEC’s ultimate direction remains uncertain.

 

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AI-Driven Automation and Continuous Accounting Frameworks

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2 weeks ago

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August 15, 2026

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The accounting profession is undergoing a fundamental structural transition as enterprise finance departments shift from periodic month-end closes toward automated continuous accounting models. By integrating specialized machine learning algorithms directly into enterprise resource planning (ERP) platforms, chief accounting officers are transforming financial reporting from a retrospective exercise into a real-time operational asset.

The Shift from Periodic Close to Continuous Financial Reporting
Traditional accounting workflows heavily relied on manual data reconciliation, spreadsheet calculations, and multi-week closing cycles at the end of each fiscal period. In contrast, continuous accounting frameworks utilize automated software agents to process, validate, and post transactional data in real time as business activities occur.

Automated bank reconciliation tools cross-reference incoming bank feeds, invoice records, and purchase orders automatically. By resolving transactional variances instantly throughout the month, corporate accounting teams eliminate the traditional workload spikes associated with quarterly and annual closes.

Machine Learning in Audit Trails and Anomaly Detection
Advanced natural language processing (NLP) and machine learning tools are redefining internal audit and financial control environments. Automated systems analyze 100% of general ledger entries, identifying anomalous transactions, duplicate payments, and unauthorized journal entries in real time.

Rather than relying on random statistical sampling, corporate internal auditors can focus their attention on high-risk flags automatically surfaced by algorithmic monitoring platforms. This continuous risk assessment strengthens internal controls over financial reporting (ICFR) and significantly reduces fraud risk.

Evolving Roles for Accounting Professionals
As routine data entry and manual reconciliation tasks become fully automated, the skill set required for accounting professionals is shifting toward data analysis, system design, and strategic business advisory.
– Systems Governance: Accountants are increasingly responsible for monitoring algorithmic accuracy and managing data integration pipelines.
– Business Partnership: Finance professionals leverage real-time financial dashboards to advise operational leaders on margin management and working capital allocation.
– Regulatory Compliance Management: Accounting teams utilize automated platforms to ensure compliance with dynamic tax codes and international accounting standards.

Core Implementation Recommendations
1. Deploy Automated Reconciliation Tools: Integrate continuous transaction processing modules into existing enterprise ERP architectures.
2. Establish Algorithmic Governance Controls: Implement strict internal testing protocols to ensure automated accounting rules comply with GAAP/IFRS standards.
3. Reskill Accounting Teams: Invest in training finance staff on data analytics, workflow automation, and predictive financial modeling.

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Accounting

Global ESG Reporting Standards and Double Materiality Compliance

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2 weeks ago

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August 9, 2026

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Corporate accounting departments face expanding reporting expectations as international sustainability disclosure standards achieve regulatory enforcement across major global jurisdictions. Chief Accounting Officers (CAOs) and corporate controllers are establishing rigorous internal accounting controls to treat Environmental, Social, and Governance (ESG) metrics with the same data precision, auditability, and governance as traditional financial statements.

Regulatory Harmonization Under Global Sustainability Frameworks
The implementation of standardized sustainability reporting frameworks—notably rules established by international sustainability accounting boards—has created unified expectations for public and large private enterprises. Corporations must report standardized metrics covering greenhouse gas emissions (Scope 1, 2, and material Scope 3), energy utilization, workforce demographics, and supply chain governance.

In Europe and other participating international jurisdictions, double materiality principles are mandatory. Under double materiality, organizations must report both how external sustainability risks impact corporate financial performance, and how internal corporate operations affect surrounding environmental and social structures.

Integrating Sustainability Metrics into Core ERP Systems
To provide auditable non-financial data, enterprise organizations are integrating specialized carbon accounting and ESG management platforms directly into core ERP systems. Automated data collectors capture energy utility invoices, logistics fuel consumption metrics, and vendor compliance records in real time.

Establishing automated, traceable data pipelines ensures that non-financial reporting is supported by clear audit trails. This structured approach allows external financial auditors to provide reasonable assurance on sustainability disclosures during annual corporate reporting cycles.

Financial Impacts and Capital Market Disclosure
Accurate ESG reporting directly influences corporate cost of capital and institutional credit ratings. Commercial lenders and institutional asset managers systematically incorporate sustainability metrics into risk pricing models. Companies that demonstrate transparent, verifiable progress in operational energy efficiency and climate risk mitigation benefit from expanded access to green bond markets and lower debt pricing.

Action Steps for Accounting Leadership
1. Implement Double Materiality Frameworks: Conduct comprehensive assessments to identify material financial and operational sustainability metrics.
2. Build Auditable Non-Financial Data Pipelines: Automate ESG data collection within core accounting software to ensure data integrity.
3. Align Sustainability with Annual Financial Filings: Prepare non-financial disclosures concurrently with financial statements to satisfy regulatory audit expectations.

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