Flexible Spending Account (FSA) Vs. Health Savings Account (HSA): A Side-by-Side Comparison

If you are rummaging through your employer's annual enrollment paperwork and can't decide if you need a Flexible Spending Account or a Health Savings Account then you stumbled to the right place. As I was preparing for the birth of our first child I spent countless hours trying to decide what was right for me. Lucky for you, I've compiled all the points that were important to me right here for you.

1. Flexible Spending Accounts and Health Savings Accounts both have the benefit of being "pre-tax". You will be able to have the amount deducted from your paycheck before taxes are levied, or you will be able to contribute to the plan and write it off at the end of the tax year.
2. The Flexible Spending Account has only one contribution limitation for individuals or families of $5,000 per plan year. The Health Savings account has one limit for individuals ($3,000) and one for families ($5,950) for the entire year.
3. The Health Savings Account has the potential to roll over for you from year to year meaning that regardless of when you use your money, you GET to use your money. However, the Flexible Spending Account can only be used in the plan year in which it is contributed to.
4. The Health Savings Account will allow your money to accrue interest as it sits waiting for your use; the Flexible Spending Account is only for the plan year so it does not accrue any interest.
5. The money contributed to your Health Savings Account accrues like any other savings account does, as the money is deposited. In other words, if you contribute $100 per pay period, then you would have $200 at the end of January available for use. However, the Flexible Spending Account goes by the contribution for the plan year and is available to you at any point during that plan year. For example, if you pledge to contribute $2,400 for the entire year, that amount is available to you immediately regardless of the time of year.

Keep in mind that both of these options aren't available to you with every health insurance plan that you can get both inside and outside your workplace. Generally, a Health Savings Account is available with a higher-deductible plan and a Flexible Spending Account is available with a lower-deductible plan that has a higher premium. Ask your employer or health care representative what would suit you the best.