FSAs do not roll over — your money is forfeited if you don't spend it by the deadline

A Flexible Spending Account (FSA) operates under a "use-it-or-lose-it" rule set by the IRS. Any money you don't spend by the end of your plan year or the grace period is gone. You cannot roll the balance into the next year, transfer it to another account type, or get it back as a refund. This is the core rule that shapes how FSAs work and why timing matters.

The only exception is a small carryover amount that some employers offer. A few plans allow you to carry forward up to $640 (in 2024) into the next plan year, but this is optional for employers and not may provide. Even if your employer offers it, you still lose anything above that carryover limit.

Key Takeaways

  • FSA money you don't spend by your plan year's end date is forfeited — there is no rollover to the next year unless your employer specifically offers a carryover option.
  • A grace period of up to 2.5 months after your plan year ends gives you extra time to spend remaining FSA funds on may be able to access expenses from the prior year.
  • Some employers allow a carryover of up to $640 (2024 limit) to the next plan year, but this is the employer's choice and not automatic.
  • You cannot transfer FSA money to an HSA, IRA, or any other account type, even if you have those accounts.
  • The best strategy is to estimate your medical and dependent care expenses carefully during open enrollment so you don't overfund your FSA.

How the use-it-or-lose-it rule actually works

The IRS created the use-it-or-lose-it rule to prevent FSAs from becoming long-term savings accounts. Money you contribute to an FSA is pre-tax, which means the government forgoes tax revenue on those dollars. To keep the tax benefit limited, the IRS requires that FSA balances not carried over be forfeited at the end of the plan year.

Your plan year typically runs from January 1 to December 31, though some employers use different dates. On the final day of your plan year, any unspent balance disappears. You lose access to it completely — the money does not go back to your employer, does not go to a charity, and does not come back to you. It is simply gone.

This rule applies to both health care FSAs (for medical, dental, and vision expenses) and dependent care FSAs (for childcare and adult dependent care). The forfeiture happens automatically; you do not have to do anything to lose the money.

The grace period: extra time to spend your FSA balance

To soften the harshness of the use-it-or-lose-it rule, the IRS allows employers to offer a grace period of up to 2.5 months after the plan year ends. During this grace period, you can still submit claims for expenses you incurred during the prior plan year. Any money you spend during the grace period comes from your prior year's balance first.

Not all employers offer a grace period, and the length varies. Some offer the full 2.5 months; others offer less or none at all. Check your plan documents or ask your benefits administrator whether your employer offers a grace period and when it ends. If your plan year ends on December 31, a full grace period would run through mid-March of the following year.

The grace period only applies to expenses incurred during the prior plan year. You cannot use it to pay for expenses from the new plan year. For example, if your 2024 plan year ends December 31 and you have a grace period through March 15, 2025, you can submit claims for medical expenses you had in 2024, but not for expenses in 2025.

Carryover: the optional employer choice

Some employers choose to offer a carryover option, which allows you to carry forward a limited amount of unused FSA funds into the next plan year. The IRS sets an annual limit on carryover amounts. For 2024, that limit is $640. This means if you have $800 left in your health care FSA on December 31, you could carry forward $640 and lose $160.

Carryover is entirely up to the employer. Your company is not required to offer it, and many do not. If your employer does offer carryover, it typically applies to health care FSAs only, not dependent care FSAs. Check your plan documents to see whether your employer allows carryover and what the limit is.

Even if your employer offers carryover, you still cannot carry over more than the annual limit, and you still cannot roll money into a different account type. Carryover simply gives you a second chance to spend the money in the next plan year before it is forfeited again.

Why you cannot transfer FSA money to an HSA or other accounts

Many people ask whether they can move unused FSA funds into a Health Savings Account (HSA) or Individual Retirement Account (IRA) to preserve the money. The answer is no. FSA funds cannot be transferred to any other account type, including HSAs, IRAs, or regular savings accounts. The money is locked into the FSA and must be spent on may be able to access medical or dependent care expenses, or it is forfeited.

This is true even if you have both an FSA and an HSA through your employer. The two accounts are separate, and money cannot move between them. If you leave your job, you cannot take your FSA balance with you or roll it into a new employer's FSA. The balance is forfeited when your coverage ends, with limited exceptions for COBRA continuation coverage.

The only partial exception is if you experience a may have access to life event (such as losing coverage) and elect COBRA. In that case, you may be able to continue your FSA coverage and spend down your remaining balance, but this is not a transfer — it is a continuation of the same account.

Strategies to avoid losing FSA money

The best way to handle the use-it-or-lose-it rule is to estimate your expenses carefully during open enrollment. Look back at the prior year's medical and dependent care spending and use that as a baseline. Add any expected changes — a new prescription, planned dental work, or a change in childcare needs — and contribute only what you reasonably expect to spend.

If you are unsure about your expenses, contribute less rather than more. It is better to leave some money in your regular paycheck than to forfeit FSA funds. You can always increase your contribution next year if you underestimated.

As your plan year progresses, track your spending and check your FSA balance regularly. Many FSA providers offer online portals or mobile apps where you can see your balance and submitted claims. If you notice you are running low on funds with time left in the year, you can plan additional may be able to access expenses — stock up on over-the-counter medications, schedule dental cleanings, or pay for vision exams. If you are running high on funds, you can reduce spending on non-essential items.

If your employer offers a grace period, use it strategically. Submit claims for expenses you incurred late in the prior year during the grace period rather than rushing to spend money before the year ends. This gives you more time to decide what to spend on.

What counts as an may be able to access FSA expense

To spend down your FSA balance, you need to know what qualifies. For a health care FSA, may be able to access expenses include copays, coinsurance, deductibles, prescription medications, dental work, vision care, and many over-the-counter items like pain relievers, allergy medicine, and first-aid supplies. Gym memberships and cosmetic procedures do not may have access to.

For a dependent care FSA, may be able to access expenses are limited to childcare, preschool, and care for an adult dependent (such as an aging parent) that allows you to work. The care must be provided by someone you do not claim as a dependent on your taxes, with some exceptions for relatives.

The IRS maintains a detailed list of may be able to access expenses. If you are unsure whether something qualifies, ask your FSA administrator or check the IRS Publication 502 for health care expenses or the dependent care rules on the IRS website.

Frequently Asked Questions

Can I get my FSA money back if I don't spend it?

No. Unused FSA funds are forfeited at the end of your plan year. You cannot withdraw the money, transfer it to another account, or receive it as a refund. The only exception is if your employer offers a carryover option, which allows you to carry forward up to $640 (2024 limit) into the next year.

What happens to my FSA if I leave my job mid-year?

Your FSA coverage typically ends on your last day of employment. Any remaining balance is forfeited unless you elect COBRA continuation coverage, which allows you to continue the FSA and spend down the balance over time. You cannot take the money with you or roll it into a new employer's plan.

Can I use my FSA to pay for my spouse's medical expenses?

Yes, if your spouse is covered under your health insurance plan. FSA funds can be used for may be able to access medical expenses of you, your spouse, and your tax dependents. However, the expenses must be incurred while the person is covered under your plan.

Is there a penalty for not spending my FSA balance?

There is no penalty to you. The money is simply forfeited. However, some employers may view high forfeiture rates as a sign that employees are over-contributing, which can affect how the plan is managed in future years.

Can I change my FSA contribution amount during the year?

Generally, no. FSA contributions are locked in for the plan year and can only be changed if you experience a may have access to life event, such as a change in family status, loss of coverage, or a significant change in childcare costs. Open enrollment is the normal time to adjust your contribution for the next year.