What’s the Difference Between an HSA and an FSA?

Account types explained

Health savings accounts (HSAs)

An HSA is your personal healthcare piggy bank. You own the account, control the funds and keep the money even if you change jobs or retire.

Think of it as a retirement account specifically designed for healthcare expenses. The money never expires, and you can even invest it for growth over time.

• Owner: You
• Money access: Only what you've saved
• Fund growth: Yes, through investments and/or interest
• Keep forever: Yes
• Best for: Planned and unplanned healthcare expenses, long-term healthcare savings and retirement planning.

Flexible spending accounts (FSAs)

An FSA is your employer's healthcare benefit program. Your company owns the account and sets the rules for how you can use the funds.

The main appeal? You can access your full annual contribution on the first day of your plan year, even though the money comes out of your paychecks throughout the year.

• Owner: Your employer
• Money access: Full amount on the start of your plan year.
• Fund growth: No
• Keep forever: No. “Use it or lose it” applies.
• Best for: Expected annual healthcare expenses

Health Reimbursement Arrangements (HRAs)

HRAs are employer-funded accounts that help cover your medical expenses. Unlike HSAs and FSAs, you don't contribute your own money. Your employer funds the entire account, sets the monthly allowance amount and determines which expenses qualify for repayment.

• Owner: Your employer
• Money access: Based on employer rules
• Fund growth: No
• Keep forever: Depends on employer plan
• Best for: Employers who want to help employees pay for healthcare expenses coverage

HSA vs. FSA vs. HRA: Side-by-side comparison

How to qualify for each type

HSA requirements

You can contribute to an HSA only if you meet these IRS requirements:

• You're enrolled in an HSA-qualified high-deductible health plan.
• You have no other non-HSA-qualified health coverage.
• You're not enrolled in Medicare.
• Nobody claims you as a tax dependent.

Important: You can’t contribute to an HSA if you’re enrolled in a spouse’s non-eligible health plan such as TRICARE, VA benefits or a standard healthcare FSA.

FSA eligibility rules

FSAs are only available through your employer. Your company determines who can enroll and when they can enroll.

Most employers restrict FSA enrollment to annual open enrollment periods. Contact your HR or benefits department to confirm your eligibility and enrollment periods.

HRA Participation

Your employer determines HRA eligibility and contribution amounts. There's no IRS limit on how much employers can contribute to HRAs.

When can you access HSA vs. FSA funds?

FSA: Full amount available right away

Your FSA follows the “uniform coverage rule.” This means your complete annual election amount is available on the first day of your plan year, no matter how much you've actually contributed through payroll deductions.

For example, you elect $3,000 for 2026. On the first day of your plan year, you can use the full $3,000 for eligible expenses, even though you've only had one paycheck deduction of $115.

HSA: Gradual access as you save

You can only spend what you've actually contributed to your HSA. If you put in $200 per month, you'll have $200 available after your first contribution, $400 after the second and so on.

HSA vs. FSA tax benefits breakdown

Both HSAs and FSAs reduce your taxable income dollar-for-dollar. Here's what that means for your wallet:

HSA tax benefits (triple tax advantage)

1. Tax-free contributions reduce your current year income taxes.
2. Tax-free growth through interest and investment earnings.
3. Tax-free withdrawals for qualified medical expenses.

Example: Contributing the 2026 maximum of $4,400 as an individual in the 24% tax bracket saves you about $1,056 in federal taxes, plus additional savings on payroll taxes.

FSA tax benefits

FSA contributions avoid federal income tax and payroll taxes.

Example: Contributing the 2026 maximum of $3,400 in the 24% tax group saves roughly $792 in federal taxes plus payroll tax savings.

Real-world impacts on tax savings in 2026: An example

For instance, you earn $75,000 per year and are in the 24% tax bracket (2026 rules). You're married and filing taxes together. Here are the ways an HSA or FSA can make a difference in your tax savings.

If you choose an HSA ($4,400 maximum contribution) …

• Income taxes saved: $1,056
• Payroll taxes saved: $337
• Total Year 1 savings: $1,393
• Plus investment growth potential

If you choose an FSA ($3,400 contribution) …

• Income taxes saved: $816
• Payroll taxes saved: $260
• Total Year 1 savings: $1,076
• No growth opportunity

The Difference: An HSA saves you $317 more annually, plus builds long-term wealth.

Investment growth: The HSA advantage

HSAs offer something FSAs and HRAs cannot: investment growth potential.

Current investment trends

• HSA investment assets grew 38% in 2024 to $64 billion.
• Only 9% of HSA holders currently invest their funds.
• The majority keep funds in low-interest cash accounts.

Investment minimums

Most HSA providers require minimum balances before allowing investments, typically $1,000 to $2,000. Once you save that amount, most HSA providers let you invest that money.

You can choose different investment options, such as groups of stocks called mutual funds. Regular accounts called FSAs won't let you invest at all.

What expenses qualify for each account

HSA eligible expenses

The IRS determines HSA-qualified expenses; these are some that are allowed:

• Doctor visits and specialist care
• Medicine and over-the-counter medications
• Dental and vision care
• Medical equipment and supplies
• Mental health services
• Ambulance services
• Hospital stays and surgery

FSA-eligible expenses

Standard FSAs typically cover the same expenses as HSAs, but your employer's plan determines the specific list.

Limited purpose FSAs (LPFSAs) only cover dental and vision expenses. This limit allows you to have both an LPFSA and an HSA at the same time.

HRA-eligible expenses

Your employer sets the rules for HRA-eligible expenses. Most employers follow IRS guidelines similar to HSAs and FSAs.

Planning for retirement healthcare costs

Healthcare becomes your largest retirement expense after housing. Planning now prevents financial stress later.

The reality of retirement healthcare costs

A 65-year-old person can expect to spend about $172,500 on healthcare throughout retirement. This includes Medicare costs, dental work, vision care and long-term care. After housing and food, healthcare is usually your biggest expense in retirement.

Yet only 20% of Americans consider healthcare needs in their retirement planning.

HSAs as retirement healthcare accounts

After age 65, your HSA becomes even more valuable:

• Medicare premiums become eligible expenses.
• Long-term care costs qualify for tax-free withdrawals.
• General expenses are allowed (with income tax, but no penalty).

Maximizing your retirement strategy

Contributing the maximum to your HSA each year builds substantial retirement healthcare wealth. The triple tax advantage means every dollar grows more efficiently than traditional retirement accounts for healthcare expenses.

HSA vs. FSA rollover rules & year-end limits

HSA rollover rules

HSA funds never expire. Every dollar you contribute stays in your account permanently, making HSAs ideal for long-term savings.

FSA rollover rules for 2026

Standard FSAs allow you to carry forward up to $680 from 2025 to 2026. You’ll forfeit any amount over $680 unless your employer offers extra time.

This "use it or lose it" rule means careful planning is important for FSA contribution amounts.

HRA Rollover Rules

Your employer determines whether unused HRA funds roll over to the next year. Some employers allow full rollovers, others impose limits and some require annual loss.

Can you have multiple accounts?

No, enrolling in a standard healthcare FSA blocks you from making new HSA contributions. However, existing HSA funds remain yours to use.

HSA + limited purpose FSA: The perfect combination

You can have both an HSA and a limited purpose FSA (LPFSA). This combination lets you …

• Use LPFSA funds for current dental and vision expenses.
• Keep HSA funds for future healthcare costs and growth.
• Maximize your total tax-free healthcare savings.

HSA + HRA: Depends on HRA design

HRAs must be limited in scope to keep your HSA eligibility. Your employer can design HRAs that cover only dental, vision or post-deductible expenses while maintaining your HSA qualification.

HSA vs. FSA: Which account works best for you?

STEP 1: Check your health insurance.

Do you have a plan with a high deductible (this means you pay more before insurance kicks in)?

• YES → Continue to Step 2.
• NO → FSA or HRA may be your only option.

STEP 2: Estimate annual healthcare costs.

How much do you typically spend on healthcare per year?

• Less than $2,000 → HSA recommended
• $2,000–$5,000 or more → Could work with either; HSA still better for growth.

STEP 3: Consider job stability.

Do you plan to stay in your current job?

• YES (3+ years) → HSA or FSA both work.
• NO (changing jobs soon) → HSA strongly recommended; you keep your money.

STEP 4: Evaluate dental and vision expenses

Do you have regular dental/vision costs?

• YES → Consider Limited Purpose FSA + HSA combo.
• NO → HSA alone works best.

Choose an HSA if you …

• Want to build long-term healthcare wealth.
• Want to reduce your current year’s taxes.
• Want investment growth opportunities.
• Change jobs frequently.
• Plan for expensive retirement healthcare needs.

Choose an FSA if you …

• Have expected annual healthcare expenses.
• Need immediate access to your full contribution.
• Want to reduce current year taxes.
• Have employer matching or contribution incentives.

Choose both an HSA and LPFSA if you …

• Want maximum tax savings.
• Have regular dental and vision expenses.
• Qualify for both through your employer.

• Can manage multiple accounts effectively.

How to estimate your FSA contribution

Avoid losing money to the “use it or lose it” rule by carefully estimating your annual healthcare expenses.

Healthcare expense checklist

Use this to accurately estimate your FSA contribution.

MEDICAL VISITS & TREATMENTS
☐ Annual physical exam: $_____
☐ Medicine costs (monthly × 12): $_____
☐ Specialist visits/copays: $_____
☐ Urgent care/ER visits: $_____
☐ Physical therapy: $_____

DENTAL CARE
☐ Routine cleanings (2×/year): $_____
☐ Fillings/crowns: $_____
☐ Braces: $_____

VISION CARE
☐ Eye exams: $_____
☐ Glasses/contacts: $_____

MEDICAL EQUIPMENT & SUPPLIES
☐ Diabetic supplies: $_____
☐ Bandages/first aid: $_____
☐ Braces/supports: $_____

OTHER ANTICIPATED
☐ Planned surgeries: $_____
☐ Mental health counseling: $_____

Total Estimated: $_____
FSA Contribution for 2026: $______ (cap: $3,400)
Safety Margin for Surprises: +10% = $_____

Add a 10% buffer for unexpected expenses, but remember the $680 maximum rollover limit for 2026.

Maximizing your healthcare savings strategy

Start by maximizing your HSA.

If you qualify for an HSA, focus on maximizing this contribution first. The triple tax advantage and permanent ownership make HSAs the most valuable healthcare savings tool.

Layer in strategic FSA use.

Add a limited purpose FSA if your employer offers one. Use it for expected dental and vision expenses while keeping your HSA for growth.

Track your progress.

Monitor your healthcare spending patterns annually. This helps you optimize contributions and avoid FSA losses while building substantial HSA balances.

Plan for healthcare inflation

Healthcare costs historically outpace general inflation. Starting your healthcare savings early and maximizing tax-free contributions helps combat rising medical expenses.

Take action on your healthcare savings

Understanding these account differences is just the first step. The real value comes from implementing a strategy that matches your needs and maximizes your tax savings.

Ready to optimize your healthcare benefits? If you're a current Associated Benefits Connection® participant, our team can help you navigate these choices and maximize your savings potential.

Contact Participant Services at 800-270-7719 or Participant.Services@AssociatedBank.com for personalized guidance on your healthcare accounts.

Schedule an appointment online to discuss your specific situation with our benefits experts.

IMPORTANT: 2026 IRS Rules

These contribution limits are current as of 2026 and follow IRS rules. The limits can change each year. Before you start saving, ask your company’s HR team what the current limits are for your plan.

Before making any decisions about your healthcare accounts, consult with a financial and tax professional who understands your complete financial picture.