A Flexible Spending Account (FSA) is an employer-sponsored benefit that lets you set aside pre-tax dollars to pay for eligible health care expenses. Unlike an HSA, you don’t need a high-deductible health plan to use one — but FSAs are only available through employer benefit packages.
Key FSA rules:
FSA funds can be used for deductibles, copays, coinsurance, prescriptions, dental and vision care, and other IRS-qualified medical expenses. A dependent care FSA is a separate account used for childcare expenses.
The main differences are eligibility and portability. An HSA requires a high-deductible health plan and is yours to keep indefinitely. An FSA is offered through an employer, doesn’t require an HDHP, and funds generally expire at year-end if unused. You cannot contribute to both an FSA and an HSA in the same year unless you have a limited-purpose FSA (for dental and vision only).
Unused FSA funds are generally forfeited when you leave your employer. You may be able to elect COBRA continuation for your FSA, which lets you access the full annual amount you elected through the end of the plan year by continuing to make monthly contributions. Whether COBRA applies to FSAs depends on your employer’s plan design.
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