What is an FSA and how does it work?

A flexible spending account (FSA) is an employer-offered benefit that lets you set aside pre-tax dollars for eligible health expenses. It can lower your taxable income, but funds are generally use-it-or-lose-it within the plan year.

How it works

You decide how much to contribute for the year, and the money is deducted from your paychecks before taxes. You can use it for copays, prescriptions, and many other eligible expenses.

The use-it-or-lose-it rule

Unlike an HSA, an FSA usually does not roll over indefinitely. Many plans allow a small carryover or a short grace period, but money left beyond that is generally forfeited.

FSA vs HSA

An FSA does not require a high-deductible plan and is owned by the employer, so it usually does not follow you to a new job. An HSA is yours to keep and rolls over fully.

Frequently asked questions

＋ What is the difference between an FSA and an HSA?

An FSA is employer-owned, does not require a high-deductible plan, and is usually use-it-or-lose-it. An HSA is yours to keep, rolls over fully, and requires a qualifying high-deductible plan.

＋ Do FSA funds roll over?

Usually only a limited amount or for a short grace period, if your plan allows it. Money beyond that is generally forfeited at the end of the plan year.

＋ What can I buy with an FSA?

Eligible medical expenses such as copays, prescriptions, and certain over-the-counter items. Plan documents list what qualifies.

Educational content only — not legal, financial, or insurance advice. Requirements and pricing vary by state.

Setting aside pre-tax dollars for health costs