Understanding FSA vs HSA: What's the Difference?

Health Savings Account (HSA) and Flexible Spending Account (FSA) are both fantastic tools designed to help individuals manage healthcare costs more effectively. While they share similarities, there are key differences that set them apart.

Let's delve into the nuances of FSA vs HSA to help you make an informed decision:

Flexible Spending Account (FSA)

An FSA is usually provided by an employer, allowing employees to set aside pre-tax funds to cover eligible medical expenses. Here are some key points about FSAs:

• Contributions are deducted from your paycheck before taxes
• Use-it-or-lose-it rule where funds not used by the end of the plan year may be forfeited
• Can be used for qualified medical expenses like copays, deductibles, and even some over-the-counter medications
• Employer determines contribution limits

Health Savings Account (HSA)

An HSA is available to individuals with high-deductible health insurance plans and offers tax advantages for medical expenses. Here's what you need to know about HSAs:

• Contributions are tax-deductible or made on a pre-tax basis
• Unused funds roll over from year to year
• You own the account, so it is portable if you change jobs
• Can be used for qualified medical expenses

Key Differences:

• Ownership: You own the HSA, while the employer typically owns the FSA
• Portability: HSA can move with you, but an FSA stays with the employer
• Rollover: HSA funds roll over, but FSA funds often have a use-it-or-lose-it policy

Choosing between an FSA and HSA depends on your healthcare needs, financial situation, and future plans. Consider factors like expected medical expenses, tax benefits, and flexibility before making a decision.

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are both excellent options for managing your healthcare expenses, each designed with unique benefits that cater to different needs.

If you’re wondering what sets an FSA apart from an HSA, let's break it down and look at the distinct features that can impact your decision.