HSA vs FSA

While the two accounts are incredibly similar in terms of usage, they are regulated differently, depending on the type of account you have.

A Flex Spending Account or Flexible Spending Arrangement (FSA) is an account that you can contribute to so you can pay for medical expenses with pre-tax dollars. With both an HSA and an FSA, you can pay for out-of-pocket medical expenses and qualified medical expenses while lowering your taxable income. This type of account is often offered by employers as a benefit to their employees.

The biggest difference between an FSA and an HSA is that once you contribute money to your FSA, you need to use that money by the end of the year or else you forfeit it back to your employer who can then opt to use it to offset the costs of administering benefits or split it among employee contributions.

According to the IRS, an employer that sponsors an FSA can now allow its employees to do one of two options:

Rollover up to $500 of their FSA to the next year

OR

Allow employees a grace period of up to two and a half months to use their funds

While this modification is helpful, this means that the money that you contribute to your FSA doesn’t stay yours.