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What’s the Difference Between an HSA and an FSA?

An easy way to understand the differences in these accounts lies in their names: health savings account versus flexible spending account. 

  Health Savings Account (HSA) Flexible Spending Account (FSA)
Who contributes? You and UC. You.
How much can I contribute?

Individual coverage: Up to $3,050 (in addition to UC's $500 contribution).

Family coverage: Up to $6,100 (in addition to UC's $1,000 contribution).

Add $1,000 over and above these limits if you’re age 55 or older.

Between $180 and $2,550.
Who owns the contributions? You. You, unless you leave UC, retire or don’t use all of your funds by the end of the plan year. Learn more.
Are contributions taxable? No.* No.
Do I have to use all of the money in my account each year? No. You can save it for future expenses or retirement and earn interest on it. You can roll over a maximum of $500 to the next year ($25 minimum). Any unused amounts over that are forfeited. Learn more.
When is the money in my account available? UC contributes once during the year. Your contributions are made each pay period. Your full annual election is available to you at the beginning of the year.

*Currently, for residents of California and New Jersey, HSA contributions and earnings are not excluded from state income tax. For more information, please consult your tax adviser.

What if I don’t have enough money in my HSA to pay a medical expense?

If you need to pay a medical expense but have not deposited the funds to cover it, you have a couple of options:

  1. Many health care providers will allow you to pay installments over a period of time. You can even set up recurring payments on the HealthEquity member portal once you have authorized installment payments with your provider.
  2. You can also pay for medical expenses out-of-pocket and reimburse yourself once your balance reaches a certain amount. You can use your HSA balance to cover any eligible expenses incurred after the date your HSA is established. 

What if I leave UC?

You own your HSA, so even if you leave UC, the account stays with you. In fact, if you keep your HSA-qualified health plan (or get another HSA-qualified health plan), you can continue to contribute to your HSA through HealthEquity (or move it to another provider). 

What if I enroll in a different medical plan?

The HSP is the only HSA-qualified medical plan UC offers. If you enroll in a different plan, you cannot continue making contributions to your HSA. However, you can use any remaining HSA balance to pay eligible health care expenses for you and your dependents, tax-free.

What if I die?

Name a beneficiary for your HSA when you open your account. Spouses can assume ownership of your account without tax penalties or receive a taxable lump sum distribution. Other beneficiaries receive a taxable lump-sum payment of your account balance. Taxes are based on the value of the HSA on the date of death.

What happens if my balance falls below the minimum required for investing?

You won’t be allowed to invest any more funds until your HSA balance is over the investment minimum of $1,000. Investment and HSA cash balances are treated as separate accounts. There is no consequence to your investments if your cash balance falls below $1,000. You do not have to sell your investments, and you do not lose them. 

Are my eligible medical claims paid for or reimbursed from my investment account?

No. Investment account balances are separate from your cash balance. To use investment funds to pay for claims, you must sell shares. The proceeds from the sale are automatically deposited back to your HSA cash balance within three to five business days.

How do I know how much is in my total HSA vs. how much is invested?

Log in to HealthEquity member portal and select Account Balance from the My Account tab. Your total balance (investment and cash) is displayed as your Ledger Balance. Your total HSA cash balance (funds available to pay eligible claims or invest, if higher than the investment threshold) shows as your Available Balance. 

Do I have to pay taxes on interest earned from my investments? 

No. All interest earned on your HSA and investment accounts is tax-free*, provided it is used for qualified medical expenses. Any balances from investments sold are automatically deposited back into your HSA cash balance.

*Currently, for residents of California and New Jersey, HSA contributions and earnings are not excluded from state income tax. For more information, please consult your tax advisor.

Will the investment options change?

Although HealthEquity reserves the right to add or remove funds at any time, it rarely changes the investment options, and typically only adds additional options.

Learn More

Get all the details from HealthEquity.