The 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||$2,550|
|Changing contributions||Any time during the year||During open enrollment or with a change in employment or family status|
|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.