FSA VS HSA: Which is Right For You?
Your employer might offer a FSA and/or a HSA as a benefit if you are currently employed. Confusion about what these is not uncommon. There are many questions regarding FSAs and HSAs so let’s take a look at what these plans are and the similarities and differences between them:
What does FSA stand for? FSA stands for Flexible Spending Account.
What is a FSA account? An FSA is an acronym for the type of account called a Flexible Spending Account. If this is offered as a benefit by your employer, you can deposit money into your account to pay for medical expenses that aren’t covered by your primary health insurance carrier. There are, however, limitations on what you can use the money for.
How does a FSA work? With an FSA account, pre-tax money is taken out of your paycheck, which can save you a lot in taxes. You are given the ability to determine how much you wish to contribute per pay period. In many cases, an employer will actually make contributions to its employees FSA accounts. Only an employee can open an FSA account. If you’re self-employed, you’re not eligible for an FSA. Employees can open an FSA account regardless of what type of health insurance plan they have. It’s important to make sure that the expense is allowed under you plan when you pay for something with your FSA account, as you’ll need to submit a claim. Ask your employer for a full list of FSA approved items and services that can be paid for with funds from your FSA account. It’s important to note the employer owns the FSA account. If an employee leaves the company, any remaining funds are forfeited to the employer.
What are the FSA limits for 2023? On October 18, the IRS announced that the annual contribution limit in 2023 for health flexible spending accounts (health FSAs) will be increased to $3,050 — double the $100 increase from 2021 to 2022. The maximum carryover amount is also rising.
Can you roll a FSA over? Whether any FSA funds will roll over at the end of the year is determined by an employer. An employer may, in some cases, allow for a grace period within the next calendar year to use the funds. In other cases, there may be a limit on the amount that can be rolled over.
What is an FSA card? An FSA card a debit card that you can use to pay for FSA eligible items.
What does HSA stand for? HSA stands for Health Savings Account.
What is a HSA account? An HSA is an acronym for a type of account called a Health Savings Account. Your employer may offer an HSA account as part of your benefits but you may also be able to open a HSA account through a bank if you qualify.
How does a FSA work?
Similar to a FSA, you or your employer (or both) can contribute to a HSA account in order to cover any medical expenses that aren’t covered by your health insurance plan. You can have a HSA account only if you have a high deductible health insurance plan that covers only preventive care expenses until you reach the deductible. Unlike a FSA, you control the money in your HSA, and you can take it with you even if you change jobs. If you’re contributing to a HSA account, you can adjust the amount you contribute at any time during the year.
What are the HSA limits for 2023? The 2023 maximum contribution for self-only coverage is $4,150. The maximum contribution for family coverage is $8,300. Those age 55 and older can make an additional $1,000 catch-up contribution.
What can I use my HSA for? There are a number of HSA eligible & health-related items & services such as doctor’s office visits, acupuncture, eye exams and co-pay payments and qualifying medications and supplies that are covered. Your plan provider can provide a full list of HSA eligible expenses.
Does HSA roll over? Yes. aAt the end of a calendar year, the funds in a HSA roll over into the next calendar year. Unlike an FSA, HSA funds will not be forfeited to the employer.