Understanding HSA and FSA: What are they and how do they differ?

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are two common types of accounts that can help individuals save money for healthcare expenses. While both accounts offer tax advantages, they have key differences that are important to understand.

1. Health Savings Account (HSA):

• HSAs are available to individuals who are enrolled in a high-deductible health plan (HDHP).
• Contributions to an HSA are tax-deductible, grow tax-free, and can be withdrawn tax-free for qualified medical expenses.
• Unused funds roll over from year to year, allowing for long-term savings.

2. Flexible Spending Account (FSA):

• FSAs are offered by employers and allow employees to set aside pre-tax dollars for medical expenses.
• Contributions to an FSA are not rollover, and funds must be used within the plan year or grace period.
• FSAs are not portable, meaning funds are typically forfeited if the individual changes jobs.

Both HSAs and FSAs can be used for a variety of healthcare expenses, including copayments, deductibles, prescriptions, and even some over-the-counter medications. However, it's essential to carefully review the specific rules and regulations of each account to maximize their benefits.

Health Savings Accounts (HSAs) are powerful tools for managing healthcare costs, especially for those with high-deductible health plans (HDHPs). They allow you to build a nest egg for future medical expenses, and the best part is that your contributions are tax-deductible.