Understanding the Difference between FSA and HSA Accounts

Healthcare savings accounts, like FSAs and HSAs, are important tools to help individuals save money for medical expenses. While these accounts serve a similar purpose, there are notable differences between a Flexible Spending Account (FSA) and a Health Savings Account (HSA).

One major difference between an FSA and an HSA is how they are funded. FSAs are typically set up by employers and can be funded by both the employee and the employer, while HSAs are owned by the individual and can be funded by the individual, their employer, or both.

Another key distinction is the rollover of funds. FSAs have a 'use it or lose it' rule, meaning any funds left unspent at the end of the year are forfeited. On the other hand, HSAs allow funds to roll over from year to year, providing a long-term savings option for medical expenses.

Additionally, there are differences in eligibility requirements and contribution limits between FSAs and HSAs. FSAs are available to anyone enrolled in an employer-sponsored healthcare plan, while HSAs require individuals to be enrolled in a high-deductible health plan (HDHP).

Healthcare savings accounts have become essential financial tools for managing medical costs, and understanding the differences between Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) can help you make informed financial decisions.