First of all, that primarily depends on which health care plan you’re signing up for, they bundle separately.

If you sign up for a traditional health insurance plan, you can elect a HCFSA.

If you sign up for a high deductible health insurance plan, you can elect a HSA.

Then review some general differences between HCFSAs and HSAs.

Now some additional caveats, that some people learned the hard way in 2020 (thanks COVID-19).

• HCFSAs are considered fully funded as of January 1st. Therefore if Sick Suzzie has a major medical event on January 3rd, and retires due to that medical event on January 31st, then Sick Suzzie can use all of her that-year 2020 HCFSA dollars for eligible expenses from that January 3rd event. Compare that to HSAs, which are funded as the employee’s wages are deducted from payroll. HSA’s are not frontloaded, and Sick Suzy with only January employment would have only been able to get 1/12th of her employer-coordinated HSA funds set aside.
• HCFSAs are employer owned. If our hypothetically end of January retiring employee Healthy Helen didn’t have any expenses in January, then the funds already withheld from her January paychecks to fund the HCFSA are forfeited (there may be an option for COBRA access, but the costs of COBRA are likely high compared to the HCFSA dollars in question). If Healthy Helen had a HSA, the unused 1/12 of her employer-coordinated HSA funds would be hers to take with her.
  • COBRA access can only be elected within the first 60 days from separation of service, so stay aware of your timelines.

A side note on dependent care flexible spending accounts (DCFSAs):

• They don’t follow the same rules as HCFSAs or HSAs. DCFSAs are not front loaded, but they are employer owned, and you have to have incurred the expenses while you were employed AND actively funding the account (this last bit may differ by your employer). This last bit may be a problem if you used a special 2020/COVID option of stopping contributing to your DCFSA due to furloughs, kids at home, etc.

Remember, make big picture decisions. AFTER you’ve made decisions, then focus on optimizing the details.