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Getting the most out of your 2021 HSA & FSA plans

Perhaps you're wondering, "What should I know if I'm ending 2021 with my HSA or FSA accounts?". If so, we have you covered.

In this guide, we'll compare the FSA and HSA health plans, so you can decide how best to use them before end of year. And we'll let you in on how you can still get discounted prescriptions no matter what your HSA or FSA status is.

What is a Flexible Spending Account (FSA)?

A Flexible Spending Account is a savings plan that can only be set up by an employer for their employee. You, as the account owner, contribute a portion of your regular salary to your FSA. Your employer can also put money into the pot. In return, the FSA gives you specific tax advantages. The account funds are used to reimburse you for certain expenses related to medical and dental services. You have immediate access to funds and your FSA can be linked to your debit card.

What is a Health Savings Account (HSA)?

A Health Savings Account is another type of savings plan, but it's individually controlled. It lets you put aside money before it's taxed to pay for qualified co-payments, co-insurance, and certain other medical expenses. As long as the medical expense is qualified, you can use funds indefinitely. However, you can only contribute to an HSA if you have a High Deductible Health Plan (HDHP). Both employers (on behalf of their employees) and the self-employed can set up an HSA alongside their HDHP.

HSA vs FSA

The biggest benefits of an HSA at end of year are:

  • Triple-tax savings — contributions, investment growth, and withdrawals are all exempt from tax
  • A portable account, so you keep your funds even if you change employer in 2022
  • An under-recognized investment opportunity, as you can maximize benefits from accumulated funds each year
  • No need to declare a fixed amount for your employer to deduct from your gross pay at the start of each calendar year

An FSA, on the other hand, will offer you:

  • Significant tax savings, and you won't pay taxes on withdrawals
  • Lower overall costs for qualified medical expenses
  • No eligibility requirements and no need for an HDHP— anyone can set one up at any time
  • You can set up a Dependent Care Flexible Spending Account to help you with childcare and dependent adult care expenses

What Happens to HSA and FSA Contributions at Year's End?

Any unused contributions to an HSA can be rolled over into 2022. There's a limit to the amount you can put into your HSA account each year, however— for 2021, it was $3,600 for single coverage and $7,200 for family coverage.

The maximum contribution to an FSA for 2021 is $2,750. However, any money you put into an FSA can't be taken into 2022. They expire at the end of each year, so you'll need to use up your funds before then. One idea for doing this is to stock up on any prescription medications you know you'll need for your future wellness.

Getting Discounted Prescriptions, Whatever Your Savings Plans

There are benefits and drawbacks to both HSAs and FSAs, and you'll need to consider your end-of-year plan before December disappears. But whether you have an HSA, FSA, or neither, you can always access prescription medicines at discounted rates when you use rxless.

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