HSAs vs. FSAs

Health savings accounts (HSAs) and flexible spending accounts (FSAs) are two powerful tools to help you manage health care expenses. While they share some similarities, they differ in key ways that can impact how you use them. Understanding these differences is essential to maximizing your health care dollars.

What is an HSA?

HSAs are tax-advantaged savings accounts typically available to individuals enrolled in a high-deductible health plan (HDHP). Contributions are tax-deductible, the money grows tax-free and withdrawals for qualified medical expenses can also be made without tax implications. HSAs are owned by the individual, and funds can roll over year to year with no expiration.

What is an FSA?

An FSA is an employer-sponsored account that can allow employees to set aside pretax dollars for qualified medical expenses. Unlike HSAs, FSAs are not tied to a specific type of health plan. However, FSAs are “use-it-or-lose-it” accounts; funds must typically be used within the plan year, although some plans offer a short grace period or allow a small amount to roll over.

Key Differences

When considering HSAs and FSAs, you should understand the following distinctions:

• Eligibility—HSAs require enrollment in an HDHP, while FSAs do not.

• Ownership—HSAs are owned by the individual, whereas FSAs are owned by their employer.

• Rollover—HSA funds can roll over indefinitely, but FSA funds usually expire annually.

• Portability—HSAs stay with you even if you change jobs, while FSAs do not.

Making the Most of Your Account

To maximize your HSA and FSA benefits, consider the following general guidance:

• Think about choosing an HSA if you have an HDHP and want long-term savings potential.

• Consider maintaining FSAs for predictable, short-term medical expenses.

• Plan contributions carefully to avoid losing unused FSA funds at the end of the year.

• Track eligible expenses and keep receipts for reimbursements.

We’re Here to Help

At 314 Insurance Advisors in La Grange, Kentucky, we can help you understand HSAs vs FSAs and effectively address your health care needs. Contact us today to learn more.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.