Open enrollment season is here, and two accounts with nearly identical letters are tripping up workers across the country.
A flexible spending account (FSA) and a health savings account (HSA) both let you pay for medical costs with pre-tax dollars, but the rules around deadlines, rollovers, and who qualifies are wildly different.
Pick wrong, and you can kiss hundreds of dollars goodbye.
The biggest gap is the "use it or lose it" rule.
Most FSAs require you to spend the balance by December 31, though many employers offer a grace period until March 15 or let you roll over up to $640 in 2025.
Anything beyond that goes back to your employer.
HSAs have no deadline at all — the money is yours forever, rolls over every year, and can be invested like a retirement account.
You can only open an HSA if you're enrolled in a high-deductible health plan, which for 2025 means a deductible of at least $1,650 for individuals or $3,300 for families.
FSAs have no such requirement, so they're available to folks on traditional copay plans.
That's why many families end up with an FSA simply because their plan rules out an HSA.
Contribution limits for 2025 tell another story.
FSA employees can set aside up to $3,300, or $6,600 if their employer offers a dependent care FSA.
HSA limits are $4,300 for individuals and $8,550 for families, with an extra $1,000 catch-up contribution if you're 55 or older.
Employers often chip in to HSAs too, which sweetens the deal.
Here's where people get burned: estimating FSA contributions too high.
If you pledge $2,500 and only spend $1,200, you could forfeit over $1,000 depending on your plan's rollover rules.
The flip side is that FSAs are fully funded on day one, so you can spend your entire annual pledge in January even if you haven't contributed it all yet.
HSAs only let you spend what's actually in the account.
A quick rule of thumb: if you're generally healthy, take few prescriptions, and want money that grows, an HSA paired with a high-deductible plan often wins.
If you have predictable expenses — regular therapy, ongoing prescriptions, kids' braces — and your employer offers a generous FSA with a rollover, that can work too.
Just do the math before you click submit.
One more thing worth checking: some employers now offer a "limited-purpose FSA" alongside an HSA that covers dental and vision only.
That combo lets you stack both accounts without running afoul of IRS rules.
The deadline to enroll or change your elections is usually tied to your employer's open enrollment window, which often closes in November or early December.
Miss it, and you're locked into your current choices until next year — or until a qualifying life event like marriage, a birth, or a job change.
My take: too many workers default to whatever they picked last year and never revisit it.
Spending 15 minutes with a calculator and last year's receipts could easily save you $500 or more.
Final Thoughts
That's a better return than most savings accounts are paying right now.