A health savings account, or HSA, and a flexible spending account or FSA, are both tax-advantaged accounts that allow you to save for medical costs. However, there are considerable differences between the two account types.
- FSAs are employer-sponsored plans, and HSAs are owned by you. Therefore, when you change employers, you can take the HSA with you, but any funds contributed to your FSA generally must be spent.
- HSAs are not “use it or lose it.” Unspent funds remain in an HSA, year after year through retirement. With FSAs, you must spend the money by the end of the year (or carryover period, if offered by your employer).
- With HSAs, you have an unlimited amount of time to reimburse yourself. You can withdraw the money for eligible expenses at any time. With FSAs, you must submit receipts by a deadline in order to substantiate the expenses as eligible per IRS requirements.
Your healthcare needs and insurance plan will help determine whether an HSA or FSA is the best fit for you.