How does a Health Savings Account (HSA) differ from a Flexible Spending Account (FSA)?

A Health Savings Account (HSA) offers distinct features that make it advantageous for individuals who are enrolled in high-deductible health plans, primarily due to its capacity to roll over unused funds from year to year. As opposed to a Flexible Spending Account (FSA), which often employs a use-it-or-lose-it policy where funds not spent by the end of the plan year are forfeited, an HSA allows participants to accumulate funds over time, providing flexibility in healthcare spending.

Additionally, HSAs can be carried beyond the year in which contributions are made, empowering account holders to save for future medical expenses. FSAs, while beneficial for predictable annual medical costs, may limit rollover options, imposing restrictions that can make long-term planning more complicated. Thus, the correct answer highlights this key difference between HSAs and FSAs regarding their associated usage terms and financial flexibility, emphasizing the roll-over capability of HSAs alongside their requirement to be linked with high-deductible health plans.