Health Saving Accounts vs. Flexible Saving Accounts

Health Savings Accounts - HSAs are tax-advantaged medical savings accounts available to taxpayers who are enrolled in an HSA-qualified high-deductible health plan. The funds contributed to the account are not subject to federal income tax at the time of deposit. Unused amounts in one year can be carried over to following years and added to subsequent contributions.

In order to qualify for an HSA, the policyholder must be enrolled in an HSA-qualified high deductible health plan, and must not be covered by other non-HDHP health insurance or Medicare, and cannot be claimed as a dependent on someone else’s tax return.

Flexible Spending Accounts - Also known as a flexible spending arrangement, is a tax-advantaged account that allows an employee to set aside a portion of earnings to pay for qualified medical expenses.

Unlike health savings accounts FSAs are more commonly offered with traditional medical plans.

Unlike health savings accounts, funds in the account that are unused when the plan year is over are lost and cannot be carried over to the following year.
The flex spending account allows you to contribute money to the FSA for costs not covered by insurance: deductibles, co-pays, and coinsurance. In addition, you can use your FSA to pay for health care costs that health insurance doesn’t cover.

Medical Accounts                        HSA                           FSA
Contribution Limit - 2013      Individual $3,250     Per Employee $2,500
                                              Family $6,450
Catch-up Contribution (55+)          $1,000                          None
Medical Plan                          HSA-Compatible              Plan Any
                                                   HDHP
Unused Amount                           Carry Over           Cannot Carry Over


Important notes:
Effective Jan. 1, 2011, expenses incurred for over-the-counter medicines, with the exception of insulin, will not be eligible for reimbursement under a health FSA, HRA or HSA without a prescription.

The penalty for using HSA funds for ineligible expenses is 20 percent of the HSA distribution.