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

• A. A FSA is employer-established with use-it-or-lose-it funding within the plan year; an HSA is portable and funds roll over.
• B. A FSA is portable and funds roll over year to year.
• C. A FSA is funded by tax-free contributions.
• D. A FSA is used only for commuting expenses.

Answer: (A)

The main idea here is how money is owned and how long it stays usable. A Health FSA is typically set up by an employer and funded through pre-tax payroll deductions, with the funds tied to the plan year and generally usable only within that year (use-it-or-lose-it). An HSA, by contrast, is owned by you, is portable when you change jobs, and the funds roll over from year to year, accumulating if you don’t spend them.

So, describing an FSA as employer-established with use-it-or-lose-it funding within the plan year, and an HSA as portable with funds that roll over, captures the key differences: ownership and year-to-year availability of funds. The other statements don’t reflect these distinctions—for example, FSAs aren’t typically portable and don’t automatically carry unused funds forward, and HSAs aren’t limited to commuting expenses.