Flexible spending accounts (FSA) and health savings accounts (HSA) are two vehicles for saving that are similar, but have subtle differences that may make one more appropriate than the other for certain people.
Both FSAs and HSAs let a person set aside money before it is taxed to pay for health care costs. Each tend to be offered by employers as part of benefits packages, but sometimes people open HSAs on their own.
HSAs enable a person to carry money forward indefinitely, so the funds are there year after year. FSAs usually have a use-or-lose policy. When a new year begins, any remaining funds are forfeited. Some FSAs enable a very small carryover amount. An HSA is owned by the individual, and everything inside it is that person’s forever. An FSA is owned by the company that offers it, and all funds can be lost if a person switches firms. These are just a few of the differences between an HSA and an FSA. HSAs seemingly offer more flexibility, but both are excellent ways for consumers to lower their tax obligations and pay for medical expenses. ✲
