How does an HSA differ from an FSA in terms of ownership and carryover?

How does an HSA differ from an FSA in terms of ownership and carryover?

• A. An HSA is employer-owned with funds that roll over year to year; an FSA is employee-owned with limited or no rollover.
• B. An HSA is employee-owned with funds that roll over; an FSA is employer-owned with unlimited rollover.
• C. An HSA is employee-owned with no rollover; an FSA is employer-owned with unlimited rollover.
• D. An HSA is employee-owned with funds that roll over year to year; an FSA is employer-owned with limited or no rollover and uses “use it or lose it.”

Answer: (D)

Ownership and carryover hinge on who controls the funds and what happens to unused money at year end. An HSA is owned by the individual; the money in it stays with you, can be carried over year after year, and you can continue contributing regardless of job changes. That makes the balance portable and growing over time. An FSA, by contrast, is typically employer-owned. The funds are set aside for the plan year to cover qualified expenses, and any money not spent by the end of that year (with limited exceptions in some plans) is forfeited—this is the “use it or lose it” principle. Rollover of unspent funds, if allowed at all, is limited. So the described distinction—HSA: employee-owned with funds that roll over year to year; FSA: employer-owned with limited or no rollover and uses “use it or lose it”—is the accurate contrast.

Ownership and carryover hinge on who controls the funds and what happens to unused money at year end. An HSA is owned by the individual; the money in it stays with you, can be carried over year after year, and you can continue contributing regardless of job changes. That makes the balance portable and growing over time.

An FSA, by contrast, is typically employer-owned. The funds are set aside for the plan year to cover qualified expenses, and any money not spent by the end of that year (with limited exceptions in some plans) is forfeited—this is the “use it or lose it” principle. Rollover of unspent funds, if allowed at all, is limited.

So the described distinction—HSA: employee-owned with funds that roll over year to year; FSA: employer-owned with limited or no rollover and uses “use it or lose it”—is the accurate contrast.