FSA vs HSA
Health Savings Account (HSA) and Flexible Spending Account (FSA) are both health savings accounts having many differences in their services.
FSA can be termed as use it or lose it account,because you lose your money if the investment is not used by the end of the year. The HSA is just the opposite of this. Your investment in HSA is not lost even if you do not use it by the end of the year. On the other hand, it is added upon to your account after each year. The unused funds can be added up even into retirement and your heirs would be able to use it after your death.
If you have an HSA, there is no need to worry of spending the money within a specific period. But if you have invested in FSA, you should have to avail the maximum of the investments within a specific period or you lose the remaining.
When you invest in FSA, you do not get any interest for your money. On the contrary, the investments in HSA comes with tax-free interests.
One big difference that is seen between the two is in the way of handling the money. While the FSA money can be used for medical expenses and childcare, the HSA can only be used for medical expenses.
As Flexible Spending Account is a ‘Spending’ account, FSA is not related to any health insurance policy. On the other hand, HSA is tied to Health insurance policies. One can have an FSA without health insurance.
Coming to the investment, there are no fixed investment limits in FSA and your employer is the person who determines it. On the contrary, the government has fixed certain limitations for investment in HSA.
On the premiums, the HSA has the lowest premium when compared to other health care accounts. You can have a Health Savings Account only if you have a high deductible insurance plan.
Summary
1.In FSA, you lose your money if it is not used by the end of the year. On the other hand, the investment in HAS is not lost even if you do not use it by the end of the year.
2.When you invest in FSA, you do not get any interest for your money. On the contrary the investments in HSA comes with tax-free interests.
3.HSA is tied to Health insurance policies. One can have an FSA without health insurance.