FSA and HSA Open Enrollment: What to Decide

Short answer

Open enrollment is the annual window when you choose whether to have an FSA, HSA, or HRA for the coming year, and how much to contribute. Once the window closes, your election is locked in for the entire plan year unless you have a qualifying life event (like losing health coverage or having a baby). Understanding what you're deciding now saves confusion later.

Three decisions happen at open enrollment. First, you choose your account type: FSA, HSA, HRA, or no healthcare account at all. Second, you elect how much to contribute. Third, if you're pairing an HSA with medical insurance, you also decide whether to add a limited-purpose FSA to cover dental and vision. Each choice carries different rules about spending, carryover, and how your money behaves at year-end.

What open enrollment decides

Open enrollment is your employer's annual window, usually in the fall, when you elect what health benefits you want for the next plan year. For FSAs, HSAs, and HRAs, open enrollment is where you make three binding choices that hold for the entire coming year: whether to participate in an account at all, which type of account you want, and how much to contribute.

Why these choices are locked in

Once your open enrollment window closes, you cannot change your election again until the next year, except in specific circumstances. The IRS rule is rigid: your election applies to the whole plan year. If you experience a qualifying life event, such as birth, adoption, loss of health coverage, divorce, or marriage, you can change your elections outside open enrollment. If not, you're committed to what you chose.

The account types available to you

At open enrollment, your employer likely offers three healthcare savings accounts, though not all employers offer all three. A Health FSA (Flexible Spending Account) lets you set aside pre-tax money for medical, dental, and vision expenses, up to an IRS annual limit. An HSA (Health Savings Account) is a triple-tax-advantaged account you can only open if you're enrolled in a high deductible health plan. An HRA (Health Reimbursement Arrangement) is funded by your employer, not by your paycheck, and the rules vary by employer. You may also choose to participate in none of them.

The three decisions you make at open enrollment

At open enrollment, you face three decisions. First, pick your account type: FSA, HSA, HRA, or none. Second, decide how much to contribute from your paycheck. Third, if you're pairing an HSA with dental and vision coverage, choose whether to add a limited-purpose FSA. Each path has different trade-offs in spending rules, carryover, and year-end timing.

Decision 1: FSA or HSA?

The first choice is between FSA and HSA. Start here: what's the difference between an HSA and an FSA? Both are tax-advantaged accounts that let you pay for qualified medical expenses without income tax. The biggest difference is that an FSA is a use-it-or-lose-it account. Money you don't spend by the end of the plan year is forfeited unless your plan offers carryover or a grace period. An HSA grows tax-free with no deadline to spend. Another key difference: to have an HSA, you need to be enrolled in an HDHP. An FSA works with any health plan. If you want your healthcare savings to roll over year to year, HSA is the right pick. If you want to save money this year on this year's expected spending, FSA is often simpler. If you're comparing HSA to HDHP rules, read HDHP and HSA: How the pairing works.

Decision 2: How much to contribute?

Once you pick your account type, you elect how much to contribute for the coming year. The IRS sets a maximum for each type. Two guides handle this in detail: How much should I contribute to my FSA? and How much to contribute to an HSA. The short version is to estimate your expected healthcare spending for the next twelve months, including deductibles, copays, and eligible purchases like over-the-counter medicines, medical devices, dental work, and vision care. Contribute what you expect to spend. For FSAs, being conservative is smart because unused money can be forfeited. For HSAs, contributing more than you spend isn't a loss because the balance stays yours forever.

Decision 3: Limited-purpose FSA if you choose an HSA

If you elect an HSA, you may also be offered a Limited Purpose FSA (LPFSA). This is a second FSA account that covers only dental and vision expenses while your HSA covers everything else. The LPFSA lets you set aside extra pre-tax money specifically for teeth and eyes without compromising HSA eligibility. This is optional and only makes sense if your employer offers it. Learn more at Limited Purpose FSA: How it works.

A separate choice: Dependent Care FSA

Your open enrollment may also offer a Dependent Care FSA, which is a completely separate account for child care, elder care, and adult day care expenses. This is not a healthcare account. It's funded separately from your health FSA or HSA, has its own contribution limit, and follows its own rules. No letter of medical necessity applies here. If you have dependent care costs, this is a way to save on taxes for those expenses, but it's independent from your other healthcare choices.

What happens after you elect

After you make your open enrollment choices, several things happen immediately and throughout the year. Your elections take effect on the plan year start date, contributions flow from your paycheck into your chosen account, and how you can spend that money follows strict IRS rules. Understanding what comes next helps you avoid surprises at year-end.

Your election is locked in for the plan year

The moment open enrollment closes, your choice is final. Your contributions come out of your paycheck automatically each pay period, and the account you chose receives it. Changing your mind mid-year is not permitted unless you have a qualifying life event. This is why it's worth taking time to estimate your spending before the window closes.

What happens to unused money at year-end depends on your account type

FSA and HSA handle unspent money very differently, and this is the main reason to choose carefully at open enrollment. An FSA is subject to what's called "the use-or-lose rule, this requires that unused benefits or contributions remaining as of the end of the plan year be forfeited". Your employer may offer two exceptions: a carryover up to $680, which moves into the next year, or a grace period of up to 2 months and 15 days after the plan year ends. But your employer cannot offer both. The plan document spells out which, if either, applies to you. With an HSA, amounts that remain at the end of the year are generally carried over to the next year with no dollar cap and no deadline. An HRA carryover depends entirely on your employer's plan design. Read more about FSA carryover and grace periods.

When you need to use the money

For an FSA, your spending window is the plan year itself. You can spend money you contributed for that year on any qualified expenses incurred during that year. After the plan year ends, there's a run-out period, set by your plan, for claiming expenses you already incurred. After that window closes, FSA funds are gone unless your plan has a grace period or carryover. For an HSA, there is no spending deadline at all. You can spend your contributions whenever you want, and you can spend balance from years past. An HSA can serve as long-term healthcare savings.

Where Burst fits

Where a purchase needs a letter of medical necessity to be reimbursed (gym memberships, massage, fitness and recovery equipment, sleep products), Burst writes the letter and files the claim. $35, refunded if no letter is issued or the claim is denied. See how a letter works.

Frequently asked questions

What is a qualifying life event, and can I change my elections if I have one?

A qualifying life event is a major change in your circumstances, such as birth, adoption, marriage, divorce, loss of health coverage, or change in employment. If one occurs, you can request a change to your FSA or HSA election outside the normal open enrollment window. Your benefits administrator decides whether your event qualifies.

If I don't use all my FSA money by the end of the year, do I lose it?

By default, yes. That is the use-it-or-lose-it rule. However, some employers offer carryover or a grace period, which your plan document describes. If your plan offers carryover, up to $680 moves into next year. If it offers a grace period, you have 2 months and 15 days to spend into the next calendar year. Your employer chooses which, if either, to offer.

Can I have both an FSA and an HSA at the same time?

Not a general-purpose health FSA and an HSA at the same time. You can pair an HSA with a Limited Purpose FSA (LPFSA) for dental and vision only. If you elect a general health FSA, you cannot contribute to an HSA that year. Check your employer's open enrollment form to see what combinations are available.

What happens to my HSA money if I change jobs or retire?

Your HSA stays with you. It's your account, not your employer's. You can keep it open with the same provider, roll it to a new provider, or let it sit. Your HSA balance carries forward forever and you can spend it anytime on qualified medical expenses, even in retirement.

If I miss open enrollment, can I still enroll in an FSA or HSA?

For an FSA, no: the payroll election only opens at open enrollment or after a qualifying life event. An HSA is different. If you have HDHP coverage you can open and fund one on your own at any time during the year. Only the payroll deduction waits for the next window.

Does the money I contribute to an FSA or HSA reduce my taxable income?

Yes, if you contribute through your employer's payroll. Money deducted from your paycheck for an FSA or HSA is pre-tax, meaning it lowers your income before taxes are calculated. This saves you federal, state (where applicable), and payroll taxes on that money.

Can I claim a medical expense on my taxes if I already paid for it with my HSA or FSA?

No. If you use an HSA or FSA to pay for an expense, you cannot deduct that same expense on your tax return. You get the tax benefit either through the account or through an itemized deduction, but not both.

Keep reading: FSA vs HSA: The key differences, HDHP and HSA: How the pairing works, FSA Carryover: How it works, Limited Purpose FSA: How it works, and all guides on this topic.

Sources

• IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans (HSA definition and eligibility rules, carryover of HSA balance at no deadline)

• IRS Notice 2013-71 (FSA use-it-or-lose-it rule, carryover and grace period mechanics and exclusivity)

• IRS newsroom: tax inflation adjustments for tax year 2026 (2026 Health FSA salary-reduction limit ($3,400) and maximum carryover ($680))

• Rev. Proc. 2025-19 (2026 HSA and HRA contribution limits, HDHP requirements)