Health Savings and Flexible Spending Accounts – What You Need to Know

As the year comes to a close, you may have heard calls to use up unspent money in your health spending insurance account. But don’t some types of health insurance accounts let you carry over money into the next fiscal year? Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) have many similarities, but here is a run-down of the two.

HSAs and FSAs are both a kind of personal savings account earmarked for health-related expenses. You and your employer make monthly pre-taxed contributions to the account, and the money can then be spent on a broad range of medical and healthcare expenses. Neither HSAs nor FSAs contributions count towards income tax.

Health Savings Account

An HSA is only available through a high-deductible health plan. The money put into a HSA typically earns interest and typically does not expire. An HSA account can be transferred between employers if you change jobs. In 2021 the maximum HSA contribution limit is $3600 for individual plans and $7200 for family plans.

Flexible Spending Account

While an HSA belongs to the individual, an FSA belongs to your employer and cannot be transferred between jobs. The maximum contribution to an FSA is $2750, and your employer can contribute an additional $500. You don’t earn interest on the money.

When money is left at the end of the fiscal year you may lose it or your employer will offer one of two options:

• You get 2.5 more months to spend the remaining money.
• You can carry over up to $500 to spend next year.

Which health insurance option is better for me?

An HSA is ideal for people in good health who don’t visit the doctor often and for whom a high deductible plan is the most cost-effective choice. For people who use health care services more often, an FSA is the more affordable option.