This is general, educational information to help you understand common health account terminology — not personalized financial or tax advice. Specific dollar limits change annually and plan details vary by employer.
The core difference: portability and forfeiture
A Health Savings Account (HSA) is owned by you personally, independent of your employer — unused funds roll over completely and indefinitely year after year with no forfeiture, and the account stays with you even if you change jobs or health plans, provided you remain otherwise HSA-eligible. An FSA (Flexible Spending Account) is tied to your employer's specific plan, and by default follows a "use it or lose it" rule — unused funds at the end of the plan year are generally forfeited back to the employer, not refunded or carried forward, unless your specific plan offers one of two IRS-permitted exceptions.
FSA plans can offer a carryover or a grace period — never both
An employer's FSA plan can offer one of two options to soften the use-it-or-lose-it rule, but never both at once, and some plans offer neither. A carryover lets a capped amount of unused funds move into the next plan year — for plan years beginning in 2026, that cap is $680 (up from $660 for 2025), a limit that increases most years with inflation. A grace period instead gives up to an additional 2.5 months after the plan year ends to spend the previous year's remaining funds, with no dollar cap, but a hard cutoff date rather than an ongoing rollover. Checking which option, if either, your specific plan actually offers — rather than assuming a rollover cap or grace period automatically exists — is worth doing directly with your plan administrator, since defaults and available options vary by employer.
Dependent care FSAs follow a stricter rule than health FSAs
A dependent care FSA (used for eligible child or dependent care expenses) does not allow any carryover at all, even if your employer offers a carryover option for a health FSA — this is a real, distinct rule specific to dependent care accounts, and unspent dependent care FSA funds are forfeited at the end of the plan year (or grace period, if offered) with no rollover exception available, unlike health FSAs.
HSA eligibility has a real, separate requirement
An HSA can only be opened and contributed to by someone enrolled in an HSA-eligible high-deductible health plan — it's not a universally available account type independent of the health plan chosen. Also worth knowing: having a general-purpose health FSA with rollover or grace period funds can affect HSA eligibility in some cases, since the two account types have interaction rules worth checking if switching between them or holding both.
The one thing people forget
Estimate FSA contributions conservatively for the coming plan year based on realistic expected expenses, rather than maximizing the contribution and hoping to spend it all — since forfeited FSA funds don't come back, a contribution based on a genuine, careful estimate of likely qualifying expenses avoids the most common and avoidable way people lose money through an otherwise genuinely useful pre-tax account.