Difference Between FSA and MSA
A "Flexible Spending Account," or FSA, is a benefit plan that allows companies to give their workers the opportunity to pay for their out-of-pocket health and dependent care costs on a pre-tax basis, which -- over time -- lowers payroll-related taxes for both the employer and employees. An FSA is a qualified benefit plan subject to IRC Section 125 and ERISA. FSAs are typically a part of a Flexible Benefit Plan. There are two distinct types of FSAs; one for paying for unreimbursed medical services, (e.g. deductibles, co payments, or coinsurance) and another type that reimburse employees for child care or elder care services.
A "Medical Savings Account," or MSA, is a tax-deferred trust or custodial account in which you set aside money to pay for your routine, out-of-pocket health-care expenses and to build up savings for your future medical costs. You or your employer contributes money to the MSA throughout the year or by making a lump-sum payment at the beginning of the year. An MSA must be paired with a major medical health plan (sometimes called a "catastrophic plan") that has a high deductible.
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