FSA vs. HSA: Two Different Accounts — There Is No Migration

CORRECTING A MYTH FIRST: there is no 'FSA-to-HSA migration.' No form, no rollover, and no conversion moves money from a Flexible Spending Account into a Health Savings Account — they are separate accounts created by separate sections of the tax code, with separate gates. Anyone selling a migration strategy is selling a fiction. What you CAN do is plan each account on its own rules, at open enrollment, before the year starts.

THE FSA (employer plan): for 2025 you may set aside up to $3,300 by salary reduction (Rev. Proc. 2024-40), and the money comes out pre-tax — no income tax and no payroll tax. Its hard edge is use-it-or-lose-it: your employer must offer either a grace period (about 2½ extra months to spend) OR a carryover of up to $660 into the next plan year (2025 figure) — never both, and anything beyond that is forfeited. An FSA is a spend-it-this-year tool: elect what you are confident you will use.

THE HSA (yours, if you qualify): an HSA requires enrollment in a high-deductible health plan (HDHP). For 2025 the contribution limits are $4,300 for self-only coverage and $8,550 for family coverage, and the HDHP must have a deductible of at least $1,650 / $3,300 (Rev. Proc. 2024-25). Unlike the FSA, the money is yours permanently: it rolls over every year, follows you between jobs, can be invested, and is triple-tax-advantaged — in pre-tax, growing tax-free, and out tax-free for qualified medical expenses.

THE ELIGIBILITY TRAP between them: in general you cannot contribute to an HSA while covered by a general-purpose health FSA (a limited-purpose, dental/vision FSA can coexist). Both spouses' plans interact too. And both accounts lower your reported wages — and therefore your AGI — through payroll, which is why the planning happens at open enrollment, not at filing time.

Common mistakes: electing a maximum FSA and forfeiting the unused balance in December; assuming an old FSA balance can be 'moved' into a new HSA (it cannot); opening an HSA without an HDHP (contributions become taxable, with penalties); and forgetting that switching coverage mid-year prorates the HSA limit.