| Ownership | Typically owned and funded by the employer, but employees contribute through salary deductions. | Owned by the individual account holder, often offered in partnership with a high-deductible health plan (HDHP). |
| Eligibility | Generally available to employees of companies offering FSA benefits, with no requirement for an associated health plan. | Requires enrollment in a high-deductible health plan (HDHP) to qualify for HSA contributions. |
| Contribution Limits | Subject to annual contribution limits set by the IRS. Limits may change each year. | Subject to annual contribution limits set by the IRS. Limits may change each year. |
| Contributions | Contributions are typically made through salary deductions and are pre-tax, reducing taxable income. | Contributions can be made by the individual, their employer, or both, and are tax-deductible, reducing taxable income. |
| Carryover | Generally allows a limited carryover of up to $550 (as of 2022) of unused funds to the next plan year or a grace period for spending remaining funds. | Permits rollover of unused funds from year to year, allowing individuals to accumulate savings over time. |
| Ownership After Leaving Employer | Generally, unused funds remain with the employer if an employee leaves the company. Some plans offer a grace period. | Remains with the individual, and the account is portable, even if the individual changes jobs or leaves the employer. |
| Withdrawals for Qualified Expenses | Funds can be used for eligible healthcare expenses, including medical, dental, and vision costs. | Funds can be used for qualified medical expenses, but can also be invested and used for retirement healthcare expenses after age 65. |
| Penalties for Non-Qualified Expenses | Non-qualified withdrawals are subject to income tax and a 20% penalty. | Non-qualified withdrawals are subject to income tax and a 20% penalty if taken before age 65. After age 65, income tax applies, but there's no penalty. |
| Account Portability | Typically, accounts do not move with the employee when changing employers. | Remains with the individual, allowing continuity of contributions and savings across employers. |
| Investment Options | Limited investment options, if any, as determined by the employer's FSA plan. | Offers a range of investment options, allowing the account holder to potentially grow savings over time. |
| Role in High-Deductible Health Plan (HDHP) | Can be used in conjunction with any type of health plan, including non-HDHPs. | Requires enrollment in a high-deductible health plan (HDHP) to be eligible for contributions. |
| Tax Benefits | Contributions are tax-exempt, and withdrawals for qualified medical expenses are tax-free. | Contributions are tax-deductible, grow tax-free, and withdrawals for qualified medical expenses are tax-free. After age 65, withdrawals for any purpose are taxed as income. |
