Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) let you set aside pre-tax funds for medical expenses. The best option depends on your situation. Both must be used for IRS-approved medical costs. Read on for benefits and restrictions!
Whose Money is This?
FSAs are employer-owned and follow plan-specific rules within legal limits. HSAs are individually owned but have legal requirements, including enrollment in a high-deductible health plan. If your employer offers both, knowing the differences can help you choose the best option.
When Can I Spend this Money?
A key difference is fund availability. With an FSA, you can access the full annual amount immediately. With an HSA, you can only use what you’ve contributed so far. For example, if you commit $2,400 for the year, an FSA gives you full access right away, while an HSA provides only what you’ve deposited monthly. Think of an FSA like a credit card and an HSA like a debit card.
Do the Funds Roll Over Each Year?
A major advantage of an HSA is its ability to grow tax-free. It offers a triple tax advantage:
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Pre-tax contributions – Your deposits aren’t taxed before going into the account.
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Tax-free growth – Any earned interest or investment gains aren’t taxed if used for medical expenses.
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Tax-free withdrawals – Funds used for qualified medical expenses aren’t taxed when withdrawn.
Some HSAs even allow investments—check with your administrator for requirements.
How Much Can I Contribute?
In 2024, the IRS limits contributions to $3,200 for FSAs and $4,150 for HSAs, doubling for family plans. Employers can impose lower FSA limits since they administer the accounts.
HSAs offer a “catch-up” contribution of an extra $1,000 annually for those 55 and older. With investment options available through many HSA providers, they can also serve as a tax-advantaged way to save for future medical expenses.
Do I Have to Choose?
Another example would be when you change plans from a qualified high deduction health plan with an HSA to an employer sponsored plan that offers a FSA. Because your HSA funds roll over, you will still have them when/if decided to enroll in a plan with a FSA. You can still use the funds in the HSA to pay for medical expenses while contributing to the new FSA, but you would no longer be able to contribute to the HSA.
Still have questions about the two types of accounts? Reach out to us!
Disclaimer
Beyond Health employs licensed insurance producers authorized to sell life and health insurance in Utah, Idaho, Wyoming, Colorado, Montana, and South Carolina. Our activities comply with state licensing requirements and partner carrier guidelines.
Product availability and enrollment options may vary by state. For more information or questions, please contact us directly.
