Which statement is true about HSAs and FSAs?

• A. FSA funds roll over year to year
• B. HSAs are owned by the employer
• C. HSAs paired with HDHPs and funds roll over; FSAs are use-it-or-lose-it
• D. HSAs cannot be used for medical costs

Answer: (C)

Health Savings Accounts are owned by the individual and, when paired with a High Deductible Health Plan, the funds you contribute carry over from year to year. That means you don’t lose the money you’ve set aside if you don’t spend it in one year, and the account stays with you even if your job or plan changes. Flexible Spending Accounts, on the other hand, are usually funded by an employer and are generally subject to a use-it-or-lose-it rule within the plan year (with only limited, plan-specific exceptions for a small rollover or grace period). Because of these differences, the statement that merges both ideas—HSAs paired with HDHPs with funds that roll over, and FSAs being use-it-or-lose-it—captures the true distinction.

A common misconception is that FSAs roll over year to year or that HSAs are employer-owned; neither is accurate in the general sense. FSA funds typically don’t roll over, and HSAs are owned by the individual, not the employer. It’s also false that HSAs can’t be used for medical costs; they are specifically designed for qualified medical expenses.