There has been an undeniable growth in consumer-directed health plans in the last few years. Consumer-driven plans enable consumers to manage their health benefits through Flexible Spending Accounts and Health Savings Account.

Popularity of these health benefit accounts is rising as consumers seek to save in light of high health care costs. Explore the differences between Flex Spending Accounts and Health Savings Account below.

Health Savings Account (HSA)

To have an HSA, you must be enrolled in a high-deductible health insurance plan (HDHP).
- An HSA – similar to the tax-free FSA – is not subject to federal income taxes, or social security and Medicare taxes if contributions are made through a cafeteria plan.  
- HSA funds carry over to the next year and you can keep contributing to it (interest is tax-free).
- You cannot be claimed as a dependent on someone else’s tax return to qualify for an HSA. You also cannot be enrolled in Medicare.
- Your HSA goes with you even if you switch jobs.

According to the IRS, HSA contributions depend on a few factors including “type of HDHP coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual. “ If you have self-only HDHP coverage in 2013, you can contribute up to $3,250. For family HDHP coverage in 2013, you can contribute up to $6,450.

Flexible Spending Account (FSA)

    The FSA is also tax-free (no Social Security and Medicare taxes).
    Yearly contributions are limited to $2,500 per person.
    You must determine the amount you want to contribute to your FSA during open enrollment. The selected contribution cannot generally be changed unless you have a qualifying event.
    You and your spouse can both elect FSAs under different employers. Employers have the option of contributing to your FSA.
    You must spend yearly contributions by set deadlines - FSAs are “use it or lose it” accounts.

Dependent Care FSA

  • You can apply for a Dependent Care FSA to cover, and save on, costs for child day care or adult day care.
  • The maximum limit for the Dependent Care FSA is $5,000 per household, or $2,500 if married and filing separately.

Can I have an FSA and an HSA?

Many people wonder if they can have both an FSA and an HSA for qualified health expenses.  Yes, you can, but under special circumstances. You can have an HSA if you have a Limited Expense FSA. The Limited Expense FSA lets you put funds aside for dental, preventative care expenses and vision expenses ONLY. You could also be eligible for a Dependent Care FSA.

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