Money Matters - FSA vs. HSA

 Health-E Commerce^® releases frequently asked questions to help consumers find their best fit during benefits open enrollment

FSA Store^® and HSA Store^® deliver free calculators, personal assessment tools, and account education to help millions of consumers choose and use flexible spending accounts (FSAs) and health savings accounts (HSAs)  

The annual benefits open enrollment period is here, and in the coming months, individuals and families across the country will choose the benefits that will protect their needs in 2024. Flexible spending accounts (FSAs) and health savings accounts (HSAs) are an important part of that equation for more than 70 million Americans, and to help consumers make the best choices for their future health and wellbeing, Health-E Commerce^® is offering free FSA and HSA education, tips, and online tools.

According to the experts at Health-E Commerce, the parent brand to FSA Store^® and HSA Store^® and the first and leading online stores dedicated exclusively to selling FSA- and HSA-eligible products, following are answers to frequently asked questions that consumers should understand when selecting their health benefits for 2024.

What is an FSA and an HSA? These tax-advantaged accounts allow users to set aside pre-tax income to pay for eligible healthcare and everyday wellness expenses (as determined by the Internal Revenue Service). Contributions reduce the account holder's taxable income and withdrawals are not taxed, if funds are used for qualified expenses.

How do I enroll? An FSA can only be opened through an employer during the benefits enrollment period or if there is a qualifying event to allow a mid-year election. Any money contributed to the FSA remains with the employer in the event that an employee leaves their job for any reason (with the exception of any COBRA extension, if applicable). An HSA, on the other hand, can be opened at any time either through an employer’s benefit program or individually through an HSA administrator, as long as the person or family covered by the account is enrolled in a qualified high-deductible health plan (HDHP). An HSA is an employee-owned account that always belongs to the individual and the money in the account accrues tax-free over time and can be used to pay for qualified expenses in retirement.

What are the contribution limits? Both employees and employers can contribute to an FSA or an HSA. Employee FSA contributions are made with pre-tax payroll contributions, but employers can also make post-tax contributions to the employee FSA. The total FSA contribution amount for the year is available from day one. HSA contributions are also considered tax free, but they can be made via automatic payroll contributions or via post-tax contributions throughout the year that can be taken as an above-the-line deduction at tax time. For 2024, HSA contribution maximums will increase to an all-time high of $4,150 for individual coverage in a qualified HDHP, and $8,300 for two-person or family coverage. The total amount of employer and employee contributions cannot surpass this amount. While 2024 FSA limits have not yet been announced, Mercer is predicting a more than 5% increase to $3,200. 

Is there a spending deadline? An FSA has an annual spending deadline or a time by which the balance must be spent or remaining funds are lost. This is called a forfeiture. For most people, the FSA deadline is Dec. 31 each year; however, this deadline can vary based on an organization’s plan year. An employer may also offer an FSA deadline extension, such as a partial rollover of unused funds, a grace period (2.5 months after your plan year end date; typically March 15), and/or a run-out period. To help account holders avoid potential FSA forfeitures, FSA Store offers free FSA Deadline Alerts that remind consumers when their personal deadline is approaching. This helps to ensure they won’t lose FSA funds.

How can FSA and HSA funds be used? The list of qualified expenses for FSAs and HSAs goes well beyond doctor visits and copays. Thanks in part to advocacy efforts from Health-E Commerce and other industry leaders, eligibility has continued to expand to include everyday items like over-the-counter medications, contacts and eyeglasses, hearing aids, menstrual care products, drug-free pain relief, and even high-tech health monitoring and diagnostic devices. It’s important to review a comprehensive FSA and HSA eligibility list to understand how these tax-free funds can be used in conjunction with health plan coverage to maximize the health, wellness, and financial wellbeing for individuals and families throughout the coming year.

How much can I save? Both FSAs and HSAs can help users save an estimated 30% (or $30 on every $100) on eligible healthcare expenses, depending on an individual’s tax bracket. A key differentiator is that HSAs allow users to invest a portion of those contributions into stocks, bonds, and mutual funds for retirement. HSAs also offer a unique triple tax advantage — contributions are tax-free (either through payroll deduction or as an above-the-line deduction at tax time), interest grows tax-free, and distributions for qualified healthcare expenses are also tax-free. To help individuals plan their contributions and estimate their savings potential, Health-E Commerce offers a free FSA calculator, along with HSA calculators that illustrate tax savings potential and future value of the account. Consumers who are considering an HSA for next year, can use the free HSA My Way tool at HSA Store to explore the different ways an HSA can be used to support their lifestyle and wellness needs.

For additional information and tools, visit the HSA Store or FSA Store Learning Centers.

About Health-E Commerce

Health-E Commerce is the parent brand to FSA Store,  HSA Store and WellDeservedHealth, a family of online stores that serve the 70+ million consumers enrolled in pre-tax health and wellness accounts. The company also created Caring Mill, a popular private-label line of health products that benefits Children’s Health Fund and enables customers to make a donation with each purchase. Since 2010, the Health-E Commerce brands have led the direct-to-consumer e-commerce market for exclusively pre-tax health and wellness benefits. Health-E Commerce plays an essential role in expanding product eligibility for important new categories within the list of eligible medical expenses.