HSA vs. FSA Understanding how an HSA is different from an FSA
When it comes to planning for your financial future, there are plenty of steps you can take to give it a clean bill of health.
One of those is opening a health savings account (HSA).
Today, more than 56% of organizations offer an HSA as part of their workplace benefits package.1However, most employers typically leave it up to each individual to manage their account, despite the fact that many people don’t fully understand how an HSA works.2,3
Because there are many advantages of HSAs, it’s important to understand their benefits and how they compare to other accounts, specifically flex spending accounts (FSAs).
At first glance, HSAs and FSAs seem similar. They both offer tax benefits — and they’re both used to pay for medical expenses.
But the two accounts have plenty of differences when it comes to contribution limits and retirement implications.
Here’s what you need to know.
|
|
HSA |
FSA |
|
Who’s eligible |
Anyone enrolled in a qualifying high-deductible health plan (HDHP) who has no other coverage |
Anyone with health insurance through an employer |
|
Who owns the account |
Employee |
Employer |
|
Who’s covered |
You, your spouse, dependents and children under 27 |
You, your spouse, dependents and children under 27 |
|
What you can use it for |
|
Current healthcare expenses |
|
What’s covered |
|
|
|
Withdrawals for non-medical expenses |
|
Not allowed |
|
How to use it |
or
|
Make a claim through your employer for reimbursement; you’ll need proof of both the expense and the fact that your insurance didn’t cover it |
|
Use-it-or-lose-it provision |
None; your HSA assets roll over from year to year |
|
|
Ability to invest |
Yes; many HSA providers allow consumers to invest in mutual funds |
No |
|
Ability to save for healthcare costs in retirement |
Yes; HSA savers can hold their investments indefinitely |
No |
|
2021 contribution limits |
|
$2,750 |
An HSA — offered through your employer or another provider — can be a smart way to save for both current medical bills and healthcare costs you’ll face in retirement. Explore the benefits of an HSA today.
Empower Retirement, LLC and its affiliates are not affiliated with the author or responsible for the third-party content provided.
RO#1817523-0821
1 Society for Human Resource Management, “Healthcare and Health Services: SHRA employee benefits 2019,” 2019.
2 Plan Sponsor Council of America, “HSA Survey,” August 2021
3 Plan Sponsor Council of America, “HSA Survey,” August 2020.
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