Which is true of a health savings account but not a flexible spending account
One true statement about a health savings account (HSA) but not a flexible spending account (FSA) is that contributions made to an HSA are not subject to tax penalties if left unused at the end of the year, while funds in an FSA generally must be used within the plan year or they are forfeited.
A health savings account (HSA) is a type of account that allows individuals to save money specifically for medical expenses on a tax-advantaged basis. On the other hand, a flexible spending account (FSA) is another type of account that allows individuals to set aside pre-tax money for eligible medical expenses.
One key difference between an HSA and an FSA is that the funds in an HSA can be rolled over from year to year, while funds in an FSA generally must be used within the plan year or within a limited grace period. This means that any unused funds in an HSA can accumulate and grow over time, whereas unused funds in an FSA are usually forfeited at the end of the plan year.
Therefore, the statement that is true of a health savings account (HSA) but not a flexible spending account (FSA) is that the funds in an HSA can roll over from year to year, while funds in an FSA typically do not roll over.
A health savings account (HSA) and a flexible spending account (FSA) both provide options for saving money for medical expenses. However, there are some key differences between the two. To determine what is true about a health savings account but not a flexible spending account, we need to compare the features and rules of both accounts.
Here's how you can find the answer:
1. Research the characteristics of a health savings account (HSA): Start by finding reliable sources that explain the features and benefits of an HSA. Look for websites that specialize in personal finance or healthcare topics, or consult official government resources.
2. Research the characteristics of a flexible spending account (FSA): Similarly, research the features and benefits of an FSA. Compare the rules, regulations, and limitations of FSAs with those of HSAs.
3. Make a comparison: Based on your research, compare the features of an HSA with an FSA. Look specifically for any differences that are mentioned regarding the health savings account but not the flexible spending account.
Some potential differences you might find:
- Ownership: An HSA is owned by the individual, while an FSA is typically set up and owned by your employer.
- Portability: HSAs are generally portable, meaning you can take them with you if you change jobs or leave your current employer. FSAs, on the other hand, are typically tied to your current employer and may not be transferable.
- Contribution limits: HSAs often have higher annual contribution limits compared to FSAs, allowing individuals to save more money for medical expenses.
- Rollover of funds: HSAs allow for the rollover of unused funds from one year to the next, while FSAs typically have a "use-it-or-lose-it" rule, meaning any unused funds at the end of the year are forfeited.
By following these steps and comparing the features of an HSA and an FSA, you should be able to determine what is true of a health savings account but not a flexible spending account.