What is the difference between an HSA and an FSA?

The names sound alike, but don’t confuse the two. When you enroll in a high-deductible medical plan, you can use an HSA to pay for eligible health care expenses with tax-free money. If you elect a different medical plan or no medical coverage, you can use a health care flexible spending account (FSA), which also allows you to pay for eligible health care expenses with tax-free money. While both offer valuable tax-saving opportunities, they are very different. With an HSA, you can use the money for health care expenses now or in the future. It’s like having a 401(k) plan for medical expenses that gives you a chance to save, invest and grow your money.

With an FSA, whatever money you don’t use by the end of the year, you lose. Another important difference is that your full health care FSA contribution amount is available to you up front. However, with an HSA, the funds are not available to you until they are deposited to your account. You can’t have both an HSA and a health care FSA.