Is a Flexible Spending Account the Same as an HSA?

Both a Flexible Spending Account (FSA) and a Health Savings Account (HSA) allow you to set aside money for healthcare costs with tax advantages. The accounts let you pay for qualified medical expenses using tax-free dollars, but their structures and rules vary. The main differences involve eligibility, contribution rules, what happens to funds at year-end, and the specific tax benefits each provides.

Eligibility and Ownership Requirements

Eligibility for a Health Savings Account (HSA) is tied to your health insurance plan. To contribute to an HSA, you must be enrolled in a High-Deductible Health Plan (HDHP). For 2025, an HDHP is defined as a plan with a minimum annual deductible of $1,650 for self-only coverage or $3,300 for family coverage. These plans also have a maximum out-of-pocket expense limit of $8,300 for individuals and $16,600 for families.

In contrast, FSAs are not tied to a specific type of health plan. An FSA is an employer-sponsored benefit, meaning you can only participate if your employer offers one. Generally, employees are eligible to enroll in a healthcare FSA offered by their company regardless of the type of health insurance they have.

The ownership of these accounts also differs. An HSA is a personal bank account that you own directly. Conversely, an FSA is owned by the employer, and you forfeit any remaining funds if you leave your job.

Contribution Regulations

The Internal Revenue Service (IRS) sets annual contribution maximums for both accounts, which are subject to change with inflation. For 2025, you can contribute up to $4,300 to an HSA for self-only coverage or $8,550 for family coverage. Individuals who are age 55 or older are also permitted to make an additional “catch-up” contribution of $1,000 per year.

For FSAs, the contribution limits are lower. In 2025, the maximum employee contribution to a health FSA is $3,300. If your spouse also has an FSA through their employer, they can contribute up to the maximum in their own account as well. Unlike HSAs, there is no catch-up contribution provision for older participants in an FSA.

FSA funding comes almost exclusively from the employee through pre-tax payroll deductions, although employer contributions are permitted. HSAs offer more flexibility in this regard. Contributions to an HSA can be made by the employee, their employer, or even another person on their behalf.

Fund Accessibility and Portability

The rules surrounding fund accessibility and what happens to the money at the end of the year are significant differentiators between the accounts. An FSA is governed by the “use-it-or-lose-it” rule. This regulation means that any money left in your FSA at the end of the plan year is forfeited to your employer.

To soften the impact of this rule, employers have the option to offer one of two exceptions, but not both. The first option is a grace period, which gives you an additional 2.5 months after the end of the plan year to use the remaining funds. The second option is a carryover, which for 2025 allows you to roll over up to $660 of unused funds into the next year’s FSA.

HSAs operate under a different model. There is no “use-it-or-lose-it” rule for HSAs; all funds in the account, including contributions and earnings, roll over automatically and indefinitely. Because you own the account, it is fully portable and remains with you even if you change jobs, switch health insurance plans, or retire.

A unique feature of HSAs is the ability to invest the funds. Once your HSA cash balance reaches a certain threshold, you can invest the excess funds in options like mutual funds and exchange-traded funds (ETFs). This allows your balance to grow over the long term, similar to a retirement account. Any earnings from these investments are tax-free.

Distinct Tax Advantages

For an FSA, the primary tax benefit is twofold. Contributions are made on a pre-tax basis directly from your paycheck, which reduces your taxable income for both federal income tax and FICA taxes. When you withdraw the funds to pay for qualified medical expenses, those withdrawals are completely tax-free.

This “double-tax advantage” provides immediate savings by lowering your overall tax bill for the year. The savings from avoiding FICA taxes is an additional benefit not available with all tax-advantaged accounts.

HSAs are known for their “triple-tax advantage.” Like an FSA, contributions are tax-advantaged; they can be made pre-tax through payroll deductions or deducted on your tax return if you contribute post-tax dollars. The second advantage is that the funds within the HSA can grow tax-free through interest or investment returns.

The third tax benefit of an HSA is that withdrawals for qualified medical expenses are entirely tax-free at any time. This combination of tax-deductible contributions, tax-free growth, and tax-free withdrawals makes the HSA a unique savings vehicle for medical expenses in retirement.