Open Season explainer: Flexible spending vs. health savings account

Friday - 11/18/2011, 10:33am EST

Ed Zurndorfer, registered employee benefit consultant

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Tammy Flanagan, Senior Benefits Director, National Institute of Transition Planning

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By Jolie Lee
Federal News Radio

Open season started this week, and one area of confusion is the difference between a health care flexible spending account and a health savings account.

Ed Zurndorfer, a registered employee benefit consultant, explained the differences in an interview with Federal Drive with Tom Temin and Amy Morris.

A flexible spending account allows you to pay for medical, dental and vision costs with pre-tax dollars. Employees can set aside a minimum of $250 and a maximum of $5,000 in 2012, Zurndorfer said. You must use this money by March 15 of the following year; it does not carry over, Zurndorfer said.

FSAs allow the employees to be enrolled in any type of health plan in the Federal Employees Health Benefits program, Zurndorfer said.

A heath savings account also allows you to use pre-tax dollars to pay for out-of-pocket costs. But HSAs are different in two ways: First, you must be enrolled in a high-deductible plan. Two, your funds can carry over — up to $3,100 for self-only and up to $6,250 for self and family.

The high-deductible plans have a minimum deductible of $1,200 for self-only and $2,400 for self plus family.

"That's the bad news, but there's a lot of good news," said Tammy Flanagan, senior benefits director at the National Institute of Transition Planning, in an interview with In Depth with Francis Rose.

"I wouldn't let that word 'high-deductible' scare you off," she said.

Zurndorfer said, "If you are a single person, relatively healthy, it may make a lot of sense to start saving money for the future by enrolling in the HSA. As you get older, may have more visits to the doctor."

Flanagan said there are three "major players" in FEHB — the mail handlers benefits plan, GEHA and AETNA.

"You have to be willing to use the doctors who participate in those plans," she said.

The deadline to enroll in a FSA or HSA is close of business Monday, Dec. 12.

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