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Why adding an FSA makes an HSA even better

August 10, 2022

Saving, investing and retirement planning. These are just three of the perks you’ll experience when you participate in a health savings account (HSA). To be eligible for an HSA, there are only a few requirements, with two of the big ones being that you must be covered by a high-deductible health plan (HDHP), and you can’t participate in both an HSA and a medical flexible spending account (medical FSA).

However, just because you participate in an HSA doesn’t mean you need to miss out on the savings potential of an FSA. Limited FSAs and combination FSAs are eligible to be paired with HDHPs and HSAs. Learn three reasons you should pair your HSA with a limited FSA or combination FSA, and watch our video below as we chat with Mike Hagen, vice president, sales – Midwest, health, WEX, about his experience participating in a limited FSA. You may be surprised to learn how big of an expense his limited FSA was able to cover!

HSA + FSA perk #1: Save more money

An HSA is a smart tool for saving on eligible medical, dental and vision expenses. However, the IRS sets contribution limits on how much money you can set aside into these accounts. By pairing your HSA with a limited FSA or combination FSA, you put aside even more pre-tax dollars beyond what just an HSA allows. Eligible expenses for each of the two FSAs are:

  • A limited FSA covers dental, vision and preventive care expenses.
  • A combination FSA covers the same expenses as a limited FSA. Once the IRS deductible is met, it converts into a full medical FSA and still remains eligible to be paired with an HDHP and HSA.

“Very few individuals and families aren’t going to have something over the course of a year that falls with that [limited FSA eligible expense] category,” said Hagen on our Benefits podcast. “If it’s small or if it’s large, you can certainly take advantage of a few extra dollars staying in your pocket.”

HSA + FSA perk #2: Fast access to funds

One of the differences between an HSA and an FSA is when funds are available. With an HSA, you have access to funds as they are contributed. With an FSA, all of your funds are available on Day 1 of the plan year. By pairing an HSA with an FSA, you can access your FSA funds right away, which will give you time to build up your HSA balance.

HSA + FSA perk #3: Use HSA for savings and FSA for spending

It’s all in the name: An HSA is a “savings” account. While you can save on qualifying purchases with an HSA, it is at its best when you’re able to use it as a savings vehicle. That’s because (unlike an FSA) all HSA funds carry over from one year to the next. And you can invest your HSA funds, which is why the account rivals a 401(k) or IRA for retirement planning.

By choosing to participate in both an HSA and a limited FSA or combination FSA, you’re able to apply any dental, vision and preventive care expenses to your FSA, your HSA funds will have the ability to grow (both as you contribute them and, if you choose, through investment). That helps you harness the long-term power of an HSA.

Check out our infographic to see examples of limited FSA eligible expenses:

limited FSA eligible expenses

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