The $1,000 investing threshold is not a regulatory requirement. There is nothing in the IRS code, in HSA custodial law, or in card network rules that requires it. It is a product decision — and at the providers that still have it, it is the single biggest barrier to member investing.
Why providers still have it. Cash held in an HSA earns float income for the provider. Cash invested in funds earns very little. The $1,000 threshold is the lever that keeps cash on the provider's balance sheet for the year or two it takes a typical member to accumulate that much.
It is a small, durable, and unsexy form of revenue extraction — and it works because most members never get past the threshold. Industry data shows that fewer than 20% of HSA members at $1,000-threshold providers ever invest a dollar.
What changes when you remove it. The data is clear: members at $0-threshold providers invest at 2x to 4x the rate of members at $1,000-threshold providers. The compounding effect over 20 years is meaningful — and members notice the moment they hit the invest tile in the app.
What to ask in your next evaluation. Don't just ask if the threshold is $0. Ask the average time-to-first-investment across the member base. That number tells you whether the UX gets out of the way.
Phase 3 Benefits launched with $0 thresholds because we think the category leader of the next cycle will be the one that takes investing engagement seriously. If you want to see the experience, the demo takes 30 minutes — book one here.