FSA, HRA, HSA, COBRA, Insurance Payments

HSA vs FSA – Breaking Down the Differences

HSA vs FSAThe alphabet soup of consumer directed healthcare (CDH) – FSAs, HRAs, HSAs, MERPs, MSAs – can make it a challenge to keep track of which accounts provide what benefits. Some are strictly employee- or employer-funded, while others may be funded by any party. Some accounts offer rollover; others do not. Knowing the differences is important when it comes time to enroll for an account or when your employment status changes.

Two popular employer-sponsored benefit accounts are Health Saving Accounts (HSA) and Flexible Savings Accounts (FSA). Both offer valuable benefits, and some of them overlap, but they do differ from one another in certain important ways.

Both are designed to enable consumers to take better control of their personal healthcare. Instead of being limited only to what is covered by an insurance plan, consumers can access set-aside funds to cover healthcare fees and other qualified out-of-pocket expenses. Both can be offered through employer-sponsored benefit plans, and funds from both can be used to pay for personal expenses or those of an immediate family member. Some of the differences between the two include eligibility requirements, contribution limits, and portability.

Refer to the chart below, which further outlines the similarities and differences between an HSA vs FSA.

HSA vs FSA – Breaking Down the Differences

Item Health Savings Account Flexible Savings Account
Eligibility requirement High Deductible Health Plan (HDHP) None
Funding Employer and/or account holder Employer and/or account holder
2016 Contribution limits Individual: $3,350

Family: $6,750

$2,550
Changing contributions Any time during the year During open enrollment or with a change in employment or family status
Interest Earned Yes No
Tax advantages
  • Tax-free contributions
  • Tax-free withdrawals when used for qualified medical expenses
  • Earn tax-free interest
  • Employer-made contributions may be excluded from gross income
  • Tax-free contributions
  • Tax-free withdrawals when used for qualified medical expenses
  • Employer-made contributions may be excluded from gross income
Portability Stays with account holder None, except if eligible for FSA continuation through COBRA
Integration with other tax-advantaged accounts None Yes
Ability to Invest Yes No
Rollover/Account Accumulation Yes Partial. Some employers offer up to $500 rollover or a grace period of 2.5 months to spend unused funds
Funds available for use in retirement Yes No

 

Learn more about IRS regulations for FSAs, HSAs, and more.

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