F.S.A. vs. H.S.A.: What to Know About the Accounts That Pay Medical Costs

Two types of accounts can help you pay for medical costs and have tax benefits, but both also have possible downsides, two recently published reports found.

The two are flexible spending accounts and health savings accounts — better known as F.S.A.s and H.S.A.s. They’re related, though they have some big differences.

F.S.A.s are available only through employers. Workers set aside a fixed amount of money each year to be deducted from their paycheck before taxes, reducing their taxable income while helping them pay for out-of-pocket medical costs. But if workers change employers, the account doesn’t move with them.

Workers also face deadlines for spending their F.S.A. money on eligible care or products, although many employers offer grace periods or the option to roll over some funds from one year to the next.

In a new analysis of more than three million accounts, the Employee Benefit Research Institute found that more than half of participants (52 percent) failed to spend down their accounts in time and forfeited at least part of their contributions back to their employers in 2022, up from 44 percent in 2019.

“We did notice high shares of account holders forfeited funds,” said Jake Spiegel, a research associate at the institute and the author of the report.