Do HSA Funds Expire?

As employees look ahead to the coming months, many will start to plan out the rest of their health savings account (HSA) and flexible savings account (FSA) funds and how to spend them.

It’s important for HR administrators to keep in mind the distinction between HSA and FSA funds in order to prepare for questions that employees might have in the coming weeks about their benefits.

Read on to learn the difference between HSAs and FSAs so you can answer important questions your employees ask during open enrollment.

Reminder: What Is an HSA?

A health savings account (HSA) is a personal bank account with significant tax advantages that can be used by an individual to pay for medical expenses that aren’t covered by their insurance, typically on high-deductible health insurance plans (HDHP). HSAs are important because offering flexible, competitive benefits packages is one way to help recruit strong candidates and retain employees.

Do HSA Funds Carry Over From Year to Year?

HSA funds automatically carry over from year to year and the money can be used indefinitely, as long as the purchase is a qualified medical expense. There is a limit to the amount that a person or family can contribute to their HSA each year, as well as other limits and policies that the IRS updates each year. 

What Are HSA Contribution Limits?

The new contribution limits are dependent upon whether an individual is enrolled in self-only or family coverage under an HDHP. The 2023 HSA contributions have increased to $3,850 for single coverage and $7,750 for family coverage.

The HDHP Minimum Deductible does not apply to preventative care services, nor to services related to COVID-19 testing. It has not increased since 2022, so single coverage rises to $1,500 and family coverage rises to $3,000.

The 2023 HDHP Maximum Out-of-Pocket Limit is $7,500 for single coverage and $15,000 for family coverage. 

For those 55 and older, catch-up contributions remain at $1,000. 

What About FSA Funds?

Unlike HSAs, flexible spending accounts (FSAs) do not automatically carry over from year to year and must be spent by the end of the calendar year or the end of the plan year.

Sometimes, there may be a grace period depending on the plan. FSAs allow employees to set aside pre-taxed funds for healthcare or dependent care expenses and unlike HSAs, you do not have to be a member of a high-deductible health plan to contribute to an FSA.

HSA and FSA Benefits: Simplified

For HSA account holders, a little bit of understanding goes a long way. Key benefits for health savings accounts include:

• Triple-tax savings on deposited funds
• Account funds are automatically rolled over each year
• Money can be used indefinitely, so long as the purchase is a qualified medical expense
• People can invest their HSA funds to maximize long-term benefits

On the other hand, individuals with FSAs benefit from the following:

• No eligibility requirements
• Reduced out-of-pocket costs for qualified expenses
• Significant tax savings
• Linked to a debit card for easy use
• Immediate access to funds   
  
  

Additional Resources

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• BernieU—free online HR courses, approved for SHRM and HRCI recertification credits

• BerniePortal Blog—a one-stop shop for HR industry news
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• HR Guides—essential pillars, covering an extensive list of comprehensive HR topics
• HR Party of One—our popular YouTube series and podcast, covering emerging HR trends and enduring HR topics