| Tax-Advantaged Account Type | HSA is a tax-advantaged savings account available to individuals with High Deductible Health Plans (HDHPs). | FSA is an employer-sponsored benefit that allows employees to set aside pre-tax dollars for eligible medical expenses. |
| Ownership | Owned and funded by the individual or their employer, with contributions often made through pre-tax payroll deductions or personal contributions. | Typically owned and funded by the employer, although employees contribute through pre-tax payroll deductions. |
| Eligibility | Requires enrollment in a High Deductible Health Plan (HDHP) to be eligible to open and contribute to an HSA. | Generally available to all employees, regardless of the type of health insurance plan they have (although some employers may have restrictions). |
| Contribution Limits | Contribution limits are set annually by the IRS and can vary from year to year. In 2022, the annual limit is $3,650 for individuals and $7,300 for families. | Contribution limits are set annually by the IRS and can vary from year to year. In 2022, the annual limit is $2,750 for individuals. |
| Rollover of Funds | HSA funds roll over from year to year, with no "use it or lose it" rule. The account holder retains full control over the funds. | Generally, FSA funds must be used within the plan year, with a grace period or carryover option of up to $550 or a two-and-a-half-month grace period. |
| Investment Options | HSAs offer investment options, and account holders can invest their contributions in various financial instruments like stocks, bonds, and mutual funds. | Limited investment options, if any, as FSAs are primarily designed for short-term, tax-advantaged spending on medical expenses. |
| Use of Funds for Non-Medical Expenses | Allows for non-medical expenses, but withdrawals for non-qualified expenses are subject to income tax and a 20% penalty if made before age 65 (with some exceptions). | Generally not permitted, and any non-qualified withdrawals are subject to taxes and penalties. |
| Ownership and Portability | Highly portable, and the account remains with the individual even if they change employers or insurance plans. | Typically not portable if the account holder changes employers, as the FSA is usually tied to the employer's plan. |
| Eligibility for Contributions | Requires being enrolled in an HDHP and not being covered by other non-HDHP health insurance to contribute to an HSA. | Generally allows contributions regardless of the type of health insurance plan the individual has, but there may be exceptions or employer-specific rules. |
| Use of Funds for Qualified Medical Expenses | Permits tax-free withdrawals for eligible medical expenses for the account holder, their spouse, and dependents. | Allows for tax-free withdrawals for eligible medical expenses incurred by the account holder, their spouse, and dependents. |
| Funding and Employer Contributions | Allows for contributions made by both the individual and their employer, with potential employer contributions based on the employer's policy. | Primarily funded by employees through pre-tax payroll deductions, with limited or no employer contributions |
