FSA or HSA- Which should you use?

Which employer health plan should you use? Flexible Spending Account (FSA) or Health Savings Account (HSA)?

If you have both options available, consider the following:

       Flexible Spending Account (FSA)         Health Savings Account (HSA)
  • Best used when you expect major medical expenses such as surgery or braces.

 

  • Best used when you are mostly healthy and want to save for future medical expenses.
  • Based on your tax bracket your deduction could save as much as 35%.

 

  • Based on your tax bracket your deduction could save as much as 35%.
  • This plan is available only through an employer.

 

  • May be offered by employer.  Individuals and self-employed may also use this plan.
  • Usually partnered with a health insurance plan that has smaller deductibles such as $500.

 

  • Must be partnered with High Deductible Health Plan (HDHP).  The lowest deductible for a single is $1,300 and family is $2,600.

 

  • You can deduct up to $2,550 from your paycheck per year. The maximum is the same for singles and families.
  • You may deduct contributions of up to $3,350 for single and $6,650 for a family each year. An extra $1,000 is available for those over 55.

 

  • Must ‘use it or lose it’ each year! Your employer may allow for $500 rollover into the next plan year OR an additional two months extension to use your benefit.

 

  • No “lose it” with this account. No limit on the amount you can accumulate.  However, to remain tax free, you can use this money only for medical expenses.

 

You can withdrawal money before you can put it in, up to the amount you have chosen to contribute for the year

 

  • You pay your medical expenses directly from the Health Savings Account.
  • FSAs are tied to your employer and cannot be moved.

 

  • HSAs are portable and can be moved.  If possible, keep HSA separate from your health insurance.  It makes changing insurance easier.

If your employer has both the FSA and HSA Programs, evaluate your choice on a year by year case. You can move between the programs.

HSA’s are good to fund heavily to help with medical expenses during your retirement years. Rules change for HSA when you start on Medicare. (More on Medicare in the next blog post.)

 

 

 

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