In our June 2023 update, we saw that HSA deposit rates ticked up from previous years in response to increases in the federal funds rate between March 2022 and May 2023. Since then, the Federal Reserve raised the federal funds rate by 25 basis points, and it currently sits in the range of 5.25% – 5.50%. Projections and comments from Fed members indicate that one more rate hike of 25 basis points could be in store for 2023, though any moves will be highly dependent on economic data.
Looking at HSA deposit rates again at the end of Q3 2023, we see that this upward trend has continued. As of September 30th, 2023, HSA providers are paying an average rate of 0.34% at the $1,000 balance threshold, an increase of 7 basis points from May 2023. At the $10,000 balance threshold, the average rate providers are paying is up to 0.42%, an increase of 8 basis points from May 2023. As a reminder, HSA providers often have tiered rate schedules where higher balance accounts are offered higher rates, so the effective annual percentage yield (APY) received by an accountholder is typically a blended APY.
Note: The rates paid on a $500 balance and a $1,000 balance are the same for the top 20 providers.
We have also been tracking money market fund data as investors might use them either as an alternative to the HSA deposit account or in addition to the deposit account. As of the end of August 2023, the asset-weighted seven-day yield of government money market funds was 5.39% and total assets invested in all money market funds topped $6 trillion, up 16% since the end of 20221. Note that this money market fund data reflects all money market funds and is not HSA specific, and that money market funds are not FDIC-insured, whereas HSA deposit accounts typically are.
Note: The money market fund yield is based on the asset-weighted 7-day yield of government money market funds.
Source: FRED Economic Database, U.S. Securities and Exchange Commission
We will continue to monitor HSA deposit rates throughout the industry and look forward to sharing these insights.
Note: Data above represents Devenir’s assessment of readily available public data. For specific interest rates that apply to your HSA, please contact your HSA provider.
References
- U.S Securities and Exchange Commission. 2023. “Money Market Fund Statistics”.
https://www.sec.gov/files/mmf-statistics-2023-08.pdf