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Posted June 17, 2020

FSA vs HSA

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If you’re looking for ways to save you and your employees money, offering a health savings account (HSA) or flexible spending account (FSA) is a great place to start. Below, we’ve outlined the key differences of an HSA vs. FSA so you can see how they work, the advantages to each and why you should offer them to your employees.

Health Savings Account

An HSA is an individually owned benefits plan funded by you or the employee that lets your employees save on purchases of eligible expenses. Employees must be enrolled in a high-deductible health plan (HDHP) to be eligible, which lowers their insurance premiums.

Health savings accounts have a triple-tax advantage, meaning distributions for qualified medical expenses and investment returns are tax-free, and contributions are tax-deductible. Health savings account funds can be invested, which lets employees grow their dollars.

Our HSA comes with a low investment threshold, and our online account and mobile app makes it easy for employees to make the most out of their funds.

Flexible Spending Account

An FSA is an employer-owned account employees use to set aside funds for qualified expenses. Employees can enroll for an FSA during open enrollment, their time of hire or a status change. We offer four common types of FSAs:

Flexible spending accounts offer pre-tax savings on eligible expenses. Employees can enroll in a limited medical FSA alongside an HDHP and HSA.

Flexible spending accounts also save you money. For example, if one employee is enrolled in a medical FSA, he or she reduces the taxable income, which reduces the amount subject to Social Security and Medicare. You won’t need to pay Social Security or Medicare tax on the funds going into the FSA.

Key differences between HSA vs. FSA

  • Ownership: The participant owns their HSA. The employer owns an FSA.
  • Contribution limits: The amount varies for each, as determined by the IRS.
  • Health plan eligibility: HSA participants must be enrolled in HDHPs. FSA participants need to simply be offered a group health plan by their employer.
  • Carryover: All HSA funds carry over from year to year. Employers can only allow up to a $550 carryover of medical FSA funds, while dependent care FSA funds to not carry over.
  • Investment capability: Participants can invest HSA funds, but not FSA funds.

Can someone participate in an HSA and an FSA?

Yes! But there are restrictions. HSA participants can also participate in a limited medical FSA, a combination FSA, or a dependent care FSA. Someone can’t participate in an HSA and a medical FSA.

There are perks to participating in both accounts. 

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