| Aspect | Flexible Spending Account (FSA) | Health Savings Account (HSA) |
|---|---|---|
| Ownership | Typically owned by the employer and | Owned by the individual, allowing them to |
| administered by a third-party provider. | make decisions about contributions and use. | |
| Eligibility | Offered by employers to employees, often | Available to individuals with a qualified |
| with no eligibility requirements. | High Deductible Health Plan (HDHP) coverage. | |
| Contribution Limits | Subject to annual contribution limits set | Subject to annual contribution limits set |
| by the IRS, typically around $2,750 (2022). | by the IRS, with higher limits than FSAs. | |
| Roll-Over of Unused Funds | May allow up to $550 of unused funds to | Allows unused funds to roll over from year |
| roll over to the following year, known as | to year, with no limit on the rollover | |
| the "use it or lose it" rule. | amount, providing long-term savings. | |
| Investment Options | Generally, no investment options are | Often offers investment options, allowing |
| available; funds are typically held in | individuals to grow their savings over | |
| a non-interest-bearing account. | time through various investment choices. | |
| Tax Advantages | Contributions are pre-tax, reducing | Contributions are tax-deductible, reducing |
| taxable income, and withdrawals for | taxable income, and withdrawals for | |
| qualified medical expenses are tax-free. | qualified medical expenses are tax-free. | |
| Qualified Medical Expenses | Funds can be used for a wide range of | Funds can be used for qualified medical |
| qualified medical expenses, including | expenses, with a similar list of eligible | |
| deductibles, copayments, prescriptions, | expenses as FSAs, but with more | |
| and certain over-the-counter items. | flexibility in spending. | |
| Ownership of Funds After Leaving Employer | Generally, funds remain with the employer | The individual retains ownership of the |
| if the individual leaves the company. | HSA even if they change employers or | |
| Unused funds may be forfeited. | insurance plans. Unused funds roll over. | |
| Age Restriction on Contributions | Contributions can be made regardless of | Contributions can continue up to age 65, |
| age, without restriction. | but not once an individual enrolls in | |
| Medicare. |
Both FSAs and HSAs offer tax advantages and the ability to pay for qualified medical expenses. However, they differ in ownership, contribution limits, rollover rules, investment options, and how funds can be used, among other aspects. Understanding these differences is crucial in choosing the right account to manage healthcare expenses and save on taxes effectively.