January 8, 2024

Healthcare jargon can be confusing and may feel overwhelming when you pick options for next year’s benefits. We’re here to help you understand the difference and benefits between a Health Savings Account (HSA) and a Flexible Spending Account (FSA), so you can be better informed when selecting which account you would like to contribute to.

What is an HSA and FSA?

A Health Savings Account (HSA) is a savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. You must be enrolled in a High Deductible Health Plan to be eligible for an HSA.

A Flexible Spending Account (FSA) is an employer-sponsored account you put money into that you use to pay for certain out-of-pocket health care costs. It is also sometimes called a “Flexible Spending Arrangement.” With an FSA, you submit a claim to the FSA (through your employer) with proof of the medical expense and a statement that it has not been covered by your plan. Then, you will get reimbursed for your costs.

At a glance, these may sound similar, but we’re here to help break down the difference.

Time Constraints

Unused HSA funds roll over at the end of the year, while FSAs usually have a “use-it-or-lose-it” policy. Sometimes with an FSA, your employer can opt for a grace period up to two and a half months after the new year, but please note this is not a requirement. You can continue to build your HSA account year after year, which can be a smart choice for those who foresee larger medical expenses in the years to come.


Your HSA is yours and not tied to your employer. Even if you start your HSA with your employer and then leave that company, the account and the money inside are still yours to use. Money unused in your FSA, however, goes back to your employer when you separate from that job. The one exception is if you are eligible for COBRA continuation benefits, you can possibly still use your FSA.

Contribution Limits

Another important thing to note about each account is the amount limit you can contribute each year. The IRS has updated the 2024 contribution limits for both HSAs and FSAs. In the 2024 plan year, you’ll be able to contribute a maximum of $4,150 if you are single and $8,300 for families. If you’re 55 or older with an HSA, you’ll be able to contribute an additional $1,000.

For those with an FSA, the contribution has been raised to $3200, with a maximum carry-over of $640 for the 2025 plan year.

Selecting the Right Option

When choosing between an HSA and an FSA, consider your healthcare needs, financial goals, and risk tolerance. HSAs provide more long-term flexibility and potential for savings growth, especially for individuals expecting higher healthcare costs or those aiming to save for retirement healthcare expenses. On the other hand, FSAs offer the advantage of being available regardless of your health plan choice and can be ideal if you have consistent and predictable healthcare expenses.

Understanding the differences between HSAs and FSAs helps you make informed decisions about your healthcare benefits. Whether you opt for the flexibility and long-term potential of an HSA or the immediate tax savings of an FSA, both accounts provide invaluable financial support for your medical expenses.