Open Enrollment is your annual opportunity to make enrollment decisions that can benefit you and your family throughout the year. Three plans offered during Open Enrollment include the health savings account, health care flexible spending account and dependent care FSA — tax-advantaged accounts that can help you save on essential expenses. You can enroll in one or more of these accounts each year and contribute the maximum amount to each.

One of the greatest benefits? Every dollar you contribute to these accounts is deducted from your paycheck before taxes. This reduces your taxable income, meaning you pay less in taxes and keep more of your paycheck.

In this week’s Benefits Spotlight, we’ll explore the similarities and differences in these plans and highlight unique features and tips for how to use them strategically.

Health savings account

A health savings account, or HSA, is paired with a high-deductible health plan. The personal savings account and the funds in it are yours to keep, even if you leave IU or retire. Other benefits to enrolling include:

• Employer contribution: Each year that you enroll in the HSA, IU makes contributions to your account totaling $1,300 for an individual or $2,600 for a family. This is essentially free money for health expenses that goes directly into your account.
• Wide range of qualified expenses: HSA funds can be used for a wide range of health expenses for yourself, your spouse or your tax-dependent children, including doctor’s visits, prescriptions, dental and vision care, medical equipment and certain over-the-counter items.
• No “use it or lose it” rule: Unlike FSAs, HSAs have no requirement to use the funds within a specific time period, and all unused funds roll over from year to year.
• Investment potential: Balances over $1,000 in your HSA cash account can be invested in a wide range of mutual funds, which can help you build a substantial health care nest egg.

Healthcare flexible spending account

The healthcare flexible spending account, or FSA, works differently than an HSA. The funds can be used for many of the same health expenses, but you aren’t required to enroll in medical insurance to participate. Additionally, you must use the funds in your account within the plan year or risk losing them. Here are some of the key benefits:

• Immediate access to funds: In 2025, you can contribute up to $3,200 to the healthcare FSA. One of the biggest advantages is that your full annual contribution is available on day one of the plan year, and you “pay the account back” over the course of the year through payroll deductions. This can be helpful if you expect large expenses early in the year and want the security of knowing you can cover those costs right away.
• Wide range of eligible expenses: Healthcare FSAs cover many of the same health expenses as the HSA for yourself, your spouse and your children. However, it provides the added benefit of covering expenses for your children until they turn 26, even if they’re not your tax dependent or covered by your health plan.
• Carryover option: The healthcare FSA allows you to roll up to $640 of unused funds into the next year, reducing the “use it or lose it” aspect. However, unused funds above the carryover limit are still forfeited.

Dependent care FSA

The dependent care FSA offers a way to save on eligible care expenses for children or adults, with several key benefits to help manage your dependent care costs:

• Wide range of eligible expenses: Dependent care FSAs cover a wide range of day/evening care expenses for your children under age 13, totally disabled dependents or dependents otherwise eligible for federal income tax purposes that allow your or your spouse to work. Common examples include day care, nursery school, preschool, before- and after-school programs, summer camps (day camps only), and care provided by a babysitter or nanny.
• Grace period: FSAs traditionally require that expenses be incurred during the plan year (Jan. 1 to Dec. 31). However, the dependent care FSA allows you to continue incurring dependent care expenses for an additional 2.5 months, until March 15 of the following year.
• Annual contribution limits: In 2025, you can contribute up to $5,000 per year (or $2,500 if married and filing taxes separately). For families with significant child care costs, contributing to a dependent care FSA allows you to stretch your budget further.

Weighing your options: HSA, healthcare FSA or both

Deciding whether to enroll in one or both plans depends on your personal needs and financial goals. For some employees, enrolling in just one account is enough to cover their health care expenses and is easier to manage. Others enroll in both to cover higher health care expenses or to create a health care nest egg for the future.

Keep in mind that when you enroll in both accounts, the health care FSA can be used only for dental and vision expenses until you meet your HDHP deductible. After that, your healthcare FSA funds can also be used for medical and prescription expenses.

Lesser-known eligible items and services

When deciding whether to enroll, consider these unique items and services that HSA and healthcare FSA funds can be used for. Some expenses may include stipulations, so be sure to check the full list of eligible expenses before making a purchase.

• Acupuncture and chiropractic care.
• Menstrual care products.
• Lice treatment (home or salon).
• Hyperbaric oxygen therapy.
• Applied behavior analysis therapy.
• Batteries for qualified-expense devices (e.g., a hearing aid).
• Braille books or magazines.
• Guide dogs.
• Lactation items.
• Over-the-counter pain relievers, contraceptives (including the morning-after pill), first-aid supplies, pregnancy tests, and personal protective equipment like masks and hand sanitizer.
• Blue light glasses, reading glasses, contact lens solution.
• Medical alert bracelets or necklaces.
• Transportation costs to receive medical care.

Learn more

Open Enrollment takes place Nov. 4 to 15. Visit the Open Enrollment website to learn more about these accounts and how they could benefit you and your family. For questions about Open Enrollment or IU benefits, contact AskHR at askhr@iu.edu.