What is a key difference between a Health Savings Account (HSA) and a flexible spending account (FSA)?

A Health Savings Account (HSA) is designed for individuals with high-deductible health plans and allows for the rollover of unused funds from year to year. This feature highlights that funds in an HSA are not subjected to the "use-it-or-lose-it" rule; instead, they can continue to grow and accumulate, providing a long-term savings vehicle for medical expenses.

In contrast, a flexible spending account (FSA) typically requires that any unspent funds at the end of the plan year are forfeited, unless the plan has a carryover provision or a grace period, which is limited and defined by the employer. This fundamental difference in how the funds can be used and carried over helps individuals manage their healthcare expenses over time, making HSAs more appealing for long-term savings compared to FSAs.

Understanding this distinction is crucial for employees when making informed choices about their benefit options. It illustrates the HSA's role not just as a payment method for current expenses, but as a strategic savings tool for future healthcare costs.