FSA funds do not roll over to the next year under the standard "use-it-or-lose-it" rule

Money you contribute to a Flexible Spending Account must be spent on may be able to access medical expenses during the plan year, or you forfeit it. The IRS does not allow FSA balances to carry forward. If you have $500 left unspent on December 31, that $500 is gone — you cannot transfer it to next year, roll it into another account type, or get it back as a paycheck.

This rule exists because FSAs are tax-advantaged accounts. You contribute pre-tax dollars, which lowers your taxable income. In exchange, the IRS requires you to spend the money on may have access to medical costs within the plan year. The forfeiture rule is the trade-off for that tax benefit.

The one exception is a grace period, which some employers offer. A grace period lets you spend money from the previous year's FSA during the first 2.5 months of the new plan year. Not all employers provide this, and the rules vary by employer, so you need to check your plan documents to know whether you have one.

Key Takeaways

  • FSA money left unspent at the end of the plan year is forfeited; there is no automatic rollover to the next year.
  • A grace period, if your employer offers one, allows you to spend the prior year's FSA balance during the first 2.5 months of the new plan year.
  • You can carry over up to $610 (as of 2024, subject to annual adjustment) into a carryover account if your plan includes that feature, but this is separate from a grace period and not all plans offer it.
  • The best strategy is to estimate your medical expenses carefully during open enrollment and contribute only what you expect to spend.

Grace periods versus carryover accounts

Two different mechanisms exist to soften the use-it-or-lose-it rule, and they are not the same. A grace period gives you extra time to spend money from the prior year. A carryover account lets you move unspent money into a separate bucket that rolls into the next plan year.

With a grace period, you can use your 2024 FSA funds through March 15, 2025 (or whenever your employer's grace period ends). The money is still from the 2024 plan year, but you have a longer window to spend it. If you do not spend it by the grace period deadline, it is forfeited.

With a carryover account, unspent money moves into a new account for the next plan year. The IRS allows employers to let you carry over up to $610 per year (this limit changes annually). If your plan includes carryover, you do not lose that money — it becomes part of your next year's FSA balance. However, carryover money is still subject to the use-it-or-lose-it rule in the new plan year. You must spend it or lose it again.

Your employer chooses which option to offer, if any. Some plans have a grace period, some have carryover, some have both, and some have neither. Check your plan documents or call your benefits administrator to know what applies to you.

How to find out what your plan offers

Your employer's benefits team or the plan administrator has the definitive answer. Look for your FSA plan document, which is usually available through your HR portal or benefits website. Search for the words "grace period" or "carryover" to find the relevant section.

If you cannot locate the document, contact your HR department or benefits administrator directly. Ask them: "Does my FSA plan include a grace period, a carryover feature, or both?" They can tell you the exact dates and limits that apply to your account.

Do not assume based on what a coworker's plan offers. FSA rules are set by each employer, so two people at the same company might have different options if they are in different benefit tiers or divisions.

Strategies to avoid losing FSA money

The safest approach is to contribute conservatively. During open enrollment, estimate your medical expenses for the coming year — copays, deductibles, prescriptions, dental work, vision care, and any procedures you know are coming. Contribute only the amount you are confident you will spend. It is better to leave money on the table than to forfeit it.

Keep receipts and track your spending throughout the year. Many FSA providers offer a mobile app or online portal where you can see your balance and review may be able to access expenses. Knowing how much you have left helps you plan larger purchases before the year ends.

If you have money left with a few months to go, consider stocking up on may be able to access items: over-the-counter medications, first-aid supplies, contact lens solution, or other health products you use regularly. These purchases are FSA-may be able to access and use money you would otherwise lose.

If your plan offers a grace period, use it. Spend down your prior year's balance during the grace period window before the new plan year's money becomes your priority.

What counts as an may be able to access expense

FSA money can pay for a wide range of medical costs: doctor visits, dental care, vision care, prescriptions, mental health treatment, and many over-the-counter items. The IRS maintains a detailed list of what qualifies.

Common may be able to access expenses include copays and coinsurance, deductibles, prescription medications, eyeglasses and contact lenses, dental cleanings and orthodontia, hearing aids, and certain medical equipment like blood pressure monitors or glucose meters. Over-the-counter pain relievers, allergy medications, and cold medicines are also may be able to access.

Items that do not may have access to include cosmetic procedures, gym memberships, vitamins (unless prescribed by a doctor for a specific condition), and general health products like toothpaste or shampoo. When in doubt, check the IRS Publication 502 or ask your FSA provider whether a specific item is may be able to access before you buy it.

What happens if you change jobs or lose coverage

If you leave your job or lose FSA coverage mid-year, you typically forfeit any remaining balance. The FSA is tied to your employer's plan, and when you are no longer enrolled, the account closes.

There is one exception: COBRA (Consolidated Omnibus Budget Reconciliation Act) allows you to continue your FSA for a limited time after you leave a job, usually up to the end of the plan year. You pay the full premium yourself, but you can continue to use your FSA balance. Check with your former employer's benefits administrator to see whether COBRA is available for FSA coverage.

If you change jobs and your new employer offers an FSA, you cannot transfer your old FSA balance to the new plan. The old balance is forfeited when your coverage ends. The new plan is a separate account with its own contribution limit and plan year.

Frequently Asked Questions

Can I roll my FSA balance into an HSA?

No. FSA and HSA (Health Savings Account) are separate account types with different rules. You cannot transfer money from one to the other. However, you can have both accounts if your health plan qualifies, and you can contribute to both in the same year — they just do not share balances.

What if I do not spend my FSA by the end of the grace period?

Any money remaining after the grace period ends is forfeited. There is no second chance or exception. This is why it is important to track your balance and spend it down before the deadline.

Can I get my FSA money back as a refund?

No. Unspent FSA money is not refunded to you. It is forfeited and goes back to your employer's plan. This is part of the use-it-or-lose-it rule.

Does my spouse's FSA balance roll over to mine?

No. Each person's FSA is separate. If you and your spouse both have FSAs through your respective employers, each account has its own balance and its own use-it-or-lose-it deadline. You cannot combine or transfer balances between accounts.

Can I change my FSA contribution amount mid-year?

Only if you have a may have access to life event: marriage, divorce, birth or adoption of a child, loss of coverage, or a significant change in your spouse's benefits. Outside of these events, your contribution is locked in for the plan year. This is another reason to estimate carefully during open enrollment.