A Flexible Spending Account (FSA) is an employer-sponsored plan that allows employees to set aside pre-tax earnings to pay for eligible out-of-pocket medical expenses or dependent care. FSAs are primarily designed to help employees with short-term medical costs. These accounts are administered by employers and the contributions are usually deducted from employees’ paychecks.
A Health Savings Account (HSA) is an individual savings account that can be used to pay for qualified medical expenses. HSAs are designed for individuals with high-deductible health plans to save for future medical expenses. Contributions to an HSA are made with after-tax dollars, but the funds can be used tax-free to pay for medical expenses. Additionally, HSA funds roll over from year to year, making them a great option for long-term health savings.
