Is an HSA and FSA the Same Thing?

Health Savings Account (HSA) and Flexible Spending Account (FSA) are not the same thing, although they both can help you save money on healthcare costs. Here's a breakdown of the differences between the two:

1. Eligibility:
- HSA: You must be enrolled in a high-deductible health plan (HDHP) to qualify for an HSA.
- FSA: Available to employees regardless of their health plan.

2. Ownership:
- HSA: The account is owned by the individual, and the funds roll over year after year.
- FSA: Typically, owned by the employer, and any unused funds may be forfeited at the end of the plan year.

3. Contribution Limits:
- HSA: Higher contribution limits compared to FSAs, and individuals can invest HSA funds for potential growth.
- FSA: Lower contribution limits and funds must be used within the plan year or rollover period.

4. Portability:
- HSA: Portable, meaning you can keep the account even if you change jobs or health plans.
- FSA: Typically not portable and tied to your current employer.

5. Tax Implications:
- HSA: Contributions are tax-deductible, grow tax-free, and withdrawals for qualified medical expenses are tax-free.
- FSA: Contributions are pre-taxed, withdrawals for qualified medical expenses are tax-free.

6. Usage:
- HSA: Can be used for qualified medical expenses, including dental, vision, and certain over-the-counter items.
- FSA: Can also be used for eligible healthcare expenses but may have restrictions on what items are covered.

Both Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) provide unique benefits that can significantly lower your out-of-pocket healthcare expenses, but they differ in key areas. Understanding these distinctions is vital for maximizing your healthcare savings.