What's the difference? HSA vs FSA

What's the difference? HSA vs FSA

Open enrollment season is right around the corner and I have a few different options this year when choosing healthcare. It looks like this year the company I work for is only offering high deductible plan options. This means that I can elect to opt into an HSA or an FSA, types of healthcare savings accounts, to accumulate money to use through the plan year towards health expenses. I understand the basic premise for both types of accounts - a pre-tax deduction from your paycheck that you can then use towards medical expenses.

 

What I'm struggling with is that FSA's don't roll over from year to year. At the end of the plan year, any excess funds in your account are "absorbed" back into the company's fund. I don't understand how or why anyone would choose this option if they had the choice. Even if it was $5 I would want to retain any funds I contributed out of my paycheck towards my medical expenses.

 

Is there something I am missing in regards to FSA? Why would it be a more attractive choice than an HSA? Thanks in advance for any insight you can share, I'm really trying to understand this.

5 REPLIES

Re: What's the difference? HSA vs FSA

A HSA works like a 401k as long as use it only for medical care and you will lose non of your money from year to year, FSA is only for the year that it is used in and the rest is lost.  Also if you use the HSA for anything other than medical they will tax it.  HSA is your better choice, hope this helps.

Re: What's the difference? HSA vs FSA

That makes sense @daviscraig37! I think I would prefer to use the HSA so that I can also invest the medical dollars I don't end up needing for the year. Better safe than sorry.

Re: What's the difference? HSA vs FSA

Thanks for this really important question @PatBee. I just recently educated myself about this very topic as well, because my husband's company provides an HSA. I never heard of an FSA before. I assume that is something your company has to offer as well? Or is it something any individual can start and contribute too?

Re: What's the difference? HSA vs FSA

FSA (flexible savings account) allows pre-tax dollars to be used for other expenses, like day care expenses. It can be useful as long as your expenses are quite predictable. The HSS (health savings account) allows pretax dollars to be used for health expenses not covered by insurance...a little more restrictive, but as you have already pointed out, the left-over balance is not forfeited, as with the FSA.

Re: What's the difference? HSA vs FSA

One caveat on the HSA: You can only open one up with pre-tax money if you're in a high deductible health plan.  That currently means a deductible of $1,350 for an individual or $2,700 for a family.