Client Service September 20, 2023

Conduent to Transfer $2.7B in HSA Assets to HealthEquity

The business processes outsourcing provider will exit the flexible spending account business, and plan sponsors' accounts will transfer to HealthEquity in the first quarter of next year.

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Conduent Inc. announced that the business processes outsourcing provider will exit the flexible spending account business, a company executive confirmed.

Conduent will transfer all of its health savings account assets, currently managed on its consumer account platform, BenefitWallet, to HealthEquity Inc., a fintech company that serves as a non-bank health savings trustee.

The firms have entered into a definitive agreement to transfer $2.7 billion in HSA assets held by approximately 665,000 customers in Conduent’s BenefitWallet platform to HealthEquity, a release noted. The agreement, subject to regulatory approval, projected a purchase price of approximately $425 million for the transition of all BenefitWallet HSA accounts to HealthEquity, the release added.

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“We will be converting our HSA accounts—the BenefitWallet HSA accounts—to Health Equity at some point during the first quarter of next year, and then ultimately exiting our FSA administration business,” says John Larson, Conduent’s vice president of HR services. “This is part of our overall portfolio rationalization strategy at Conduent: driving focus within the businesses that we excel in, while rationalizing the portfolio further and exiting businesses where it makes sense.”

Plan sponsor client notifications began this week, Larson adds. For plan participants with HSAs, Conduent will continue operating BenefitWallet and maintain accounts through the early 2024 conversion date, he explains.

“As we get closer to that [conversion] date, we’ll be communicating transition plans more broadly with our account holders,” says Larson. “Until that time, it remains business as usual for BenefitWallet.” 

Currently, HealthEquity serves as the custodian of more than  with assets totaling $23.2 billion, the release stated.

“Once the deal is approved, the HealthEquity and Conduent teams will begin detailed planning for the account transfers, including client and member communications, investments and the transfer timeline,” says Richard Putnam, vice president of investor relations at Health Equity, by email.

Going forward, Conduent will partner in HSA work instead of acting as direct administrator, Larson adds. Conduent will effectively shutter BenefitWallet and then will enter into a relationship with HealthEquity “to be our preferred partner for both HSA and FSA administration moving forward,” Larson says.

Assets held in HSAs surpassed $100 billion in total assets for the first time in 2022, and accounts experienced robust asset growth early in 2023, research from HSA consultant Devenir Group LLC showed, earlier this year.

Compliance September 19, 2023

Scope of AI Conflicts Proposal Finds New Opponents on the Hill

Members of both parties have criticized the SEC’s definition of ‘covered technology’ when it comes to using AI in financial services.

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Members of both parties criticized the scope of the Securities and Exchange Commission’s proposal on artificial intelligence technology and conflicts of interest in the financial services sector at a Congressional hearing Tuesday.

The proposal would require registered investment advisers to eliminate conflicts of interest in their use of predictive AI technology. Advisers are typically only required to mitigate and disclose conflicts, rather than eliminate them entirely.

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The hearing was held by the Capital Markets Subcommittee of the House Committee on Financial Services, with testimony from William Birdthistle, director of the SEC’s division of investment management. Most of the criticism levelled at Birdthistle by policymakers was focused on the scope of the proposal, which opponents in the investment industry have previously said has a “lack of discernible boundaries” concerning which technologies are applicable.

Representative Ann Wagner, R-Missouri, the chair of the subcommittee, said the proposal is a “one-size-fits-all” approach and will “lead to a decline in retail investor participation” in securities markets.

Representative Wiley Nickel, D-North Carolina, also expressed concern about the breadth of the proposal. He said “the proposal is very broad” and will limit the market of financial advisers for retail investors. Nickel also suggested that concerns about artificial intelligence should already be covered by SEC Regulation Best Interest, and a new proposal should not be necessary.

In many instances, Birdthistle said the scope of the proposal is something being considered closely during the public comment period, which closes on October 10, and that the Representatives’ concerns were well taken.

Birdthistle explained that the “scope of the rule is restricted to machine learning, AI, predictive data analytics […] that puts [the adviser’s] interest ahead of investors,” and that this “cabins in” the scope of the proposal.

The technologies covered by the proposal, as described in the SEC’s proposal, would include any “analytical, technological, or computational functions, algorithms, models, correlation matrices, or similar methods or processes that optimize for, predict, guide, forecast, or direct investment-related behaviors or outcomes of an investor.”

Though Birdthistle indicated the rule is not as sweeping as many of its critics fear, or at least is not intended to be, he repeatedly insisted that reviewing the scope of the proposal and comments that remark upon it are key priorities for the SEC as it prepares to finalize the rule.

At a separate hearing last week held by the Senate Committee on Banking, Housing and Urban Affairs, Senator Mike Rounds, R-South Dakota, described the proposal as a “restrictive regulatory regime that will govern any analytics tool and is inconsistent with decades of legal and commission precedent regarding the handling of conflicts of interest.”

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