Flexible spending accounts and health savings accounts explained

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During benefits open enrollment, which runs through Nov. 19, you may be wondering if you should enroll in a flexible spending account or contribute to a health savings account in 2022. Both offer tax advantages and allow you to set aside money to pay for certain qualified expenses, but there are some differences.  

Flexible Spending Account

You have two FSA options: a health care FSA and a dependent care FSA. With each, you can reduce your taxable income by having contributions deducted from your paycheck before taxes. You can then use those funds later to reimburse yourself for certain qualified expenses.

Qualified expenses include:

Health care FSA – Out-of-pocket medical, dental or vision costs for yourself and your dependents, including deductibles, copays and even some over-the-counter medications.

Dependent care FSA – Child care or elder care expenses, including babysitters, nannies and day care.

Things to keep in mind as you consider enrolling in an FSA:

• Budget carefully: FSAs have a use-it-or-lose it rule, so you will forfeit your contributions if they are not used by the annual deadlines.
• The University does not contribute to FSAs.
• If you are enrolled in the high deductible health plan, your health care FSA reimbursements are limited to dental and vision expenses.

Learn more about flexible spending accounts on the Human Resources website.

Health Savings Account

Like a health care FSA, an HSA allows you to put money aside for medical, dental and vision expenses. But unlike an FSA, it does not have a use-it-or-lose it rule. The funds in an HSA are always yours to keep. They can even be used in retirement.

You must be enrolled in the high deductible health plan to have an HSA. Once you enroll in that plan, an HSA is opened on your behalf. Each payday, the University will contribute $30 for single coverage and $60 for all other coverage into your HSA. You may choose to contribute more to your HSA with pretax deductions from your paycheck as a way to reduce your taxable income and save more (up to IRS limits).

Things to keep in mind as you consider enrolling in an HSA:

• You do not pay taxes on the money contributed to an HSA, the money used to pay for eligible expenses, or any interest earned on your account.
• HSAs have some limitations on who can receive contributions. If you or your spouse has a Health Reimbursement Account through another employer, or if you are enrolled in Medicare, Medicaid or TriCare or receive care from the Veterans Administration, you may not be able to enroll in an HSA. Please speak to a tax adviser for more information.

Visit the Benefits Open Enrollment website for more information about your medical plan options, including the high deductible health plan with health savings account.

Staci Wilson is assistant vice president for human resources. She oversees employee benefits administration, which includes the benefits open enrollment process.