Today, I want to explain to you how to choose between health savings or flexible spending accounts. The most important thing to know is the main difference between these two accounts. A health savings account is an individually-owned account. That’s your money. Anything you put in there is your money. It goes with you when you leave the company. If the job ends, it’s still your money.
A flexible spending account is an employer-owned benefit, in a sense. You, as the employee, tell them how much, up to a certain limit, you want to put in over the course of a year. That is then deducted from your pay on a pre-tax basis. So you are getting a benefit.
That money in a flexible spending account is available from day one. It’s not something where you have to wait until you put the money into in order to use it, like you do with an HSA.
Those are the main differences.
Flexible Spending Accounts: “Use it or Lose it.”
“Use it or lose it.” You hear that all the time. With an FSA, flexible spending account, there are more factors you’ve got to be aware of. You’ve got to plan really well. Ask yourself, “How much in a year do I see my medical expenses being so that I don’t over-contribute and end up losing some of that money at the end of the year?”
A health savings account, you also have to say to yourself, “How much money am I willing to have taken from my check as an employee, weekly or monthly, to go into my health savings account as a pre-tax benefit?”
Using the Money in an HSA or an FSA
The next question that needs to be answered is, “What can I use that money for?” Deductibles, copays, prescriptions, dental, vision, things of that nature can be paid from these accounts. That’s money that you’re going to get a pre-tax or a post-tax deduction on. When I say post-tax deduction, that applies more to the HSA.
At MBhealth, we’ve done a lot of videos about health savings accounts. We haven’t talked as much as flexible spending accounts and we would love to have conversations with you about that.
Advantage and Disadvantages of Each Account
What are some advantages and disadvantages? It really is going to depend on each person’s specific situation. If I’m an individual and I have a lot of potential health issues and concerns, I want to talk about which could make more sense. Do I need $200, $300 a month access right away? Then a flexible spending account could make sense.
But if that amount needed is going to be high throughout the course of a year, how can I use a health savings account to make that more advantageous? We can help you answer questions like these and many more.
These two accounts are very close in terminology, but can be very different in administration. To understand the best account for you that will save you the most money, call us here at MBhealth Insurance Agency: (314) 544-5400.
