1. A Health Savings Account, or a HSA, is a tax-advantaged savings account available to those enrolled in a High-Deductible Health Plan, or HDHP; HSAs are only an option to you, if you enroll in a high-deductible health plan.
2. HSAs are NOT the same thing as FSAs—in fact, there are stark differences. However, according to a Fidelity Investment survey 75% of respondents didn’t know the difference between FSAs and HSAs! We want to do our part to bring that statistic way down, where it should be. So here are two major differences to keep in mind:
a. Savings acquired in your HSAs are not subject to the “use it or lose it” IRS rule that FSAs are: If you don’t use your FSA savings by the end of your plan year, those savings are largely forfeited! Alternatively, savings in your HSA continue to grow year after year, tax-deferred.
b. Maximum annual contributions to HSAs differ from FSAs: For single coverage, HSAs are capped at $3,250, and for family coverage contributions they're capped at $6,450. FSAs are capped at $2,550, regardless of coverage.
3. HSAs earn interest over time, and your interest earnings are tax-deferred. Withdrawals from your HSA—as long as they are used to pay for “qualified medical expenses”—are also tax-free. After age 65, your HSA withdrawals can be used for non-medical expenses without a tax penalty, though these types of withdrawals are taxed as income.
Didn't see the information you were looking for? Click here, here, or here, to find out more about HSAs, or to speak with a trusted insurance professional directly, feel free to reach out to our office—we would love to hear from you!