HSAs and FSAs

Choosing to enroll in a health savings account (HSA) or a flexible spending account (FSA) is a smart way to manage healthcare costs, but there are significant differences. You likely hear the terms every year during health insurance open enrollment: HSAs and FSAs. Maybe you know what those letters stand for, or maybe you just have a vague idea. Either way, it's important to educate yourself on HSAs and FSAs because they can save you money and help you manage your health care costs.

HSAs and FSAs are medical spending accounts that you can contribute to tax-free to save for medical costs. Both let you set aside money for health care costs, including deductibles, copayments, monthly prescription costs and some other expenses (like glasses or orthodontia). While the two accounts are similar, they do have significant differences that are important to recognize because you generally can only sign up for an HSA or an FSA, not both.

Your best resource for information on HSAs and FSAs is your Human Resources department, as each HSA and FSA plan has its own rules. However, the basic list of differences below can give you a good idea of how the plans differ.

• HSA eligibility requires a high-deductible health plan (HDHP), but an HDHP is not required for an FSA.
• Contribution limits are different for HSAs and FSAs.
• You can change contributions with an HSA anytime. FSA contributions are set at open enrollment or change of employment or family status.
• HSA unused balances roll over into next year. For FSA balances you must use it or lose it.
• HSA contributions are tax-deductible and can be pretax. FSA contributions are pretax; distributions are untaxed.

Check with your HR department for more information and help to determine the plan that's right for you.