The basic rule: most FSA funds don't roll over

Most Flexible Spending Account (FSA) money does not carry into the next year. The IRS enforces a use-it-or-lose-it rule: if you don't spend the money in your FSA during the plan year, you forfeit it. Your employer keeps the unspent balance. This applies to dependent care FSAs and healthcare FSAs alike.

The one exception is a limited carryover amount that some employers choose to offer. If your employer's plan includes a carryover provision, you may be able to roll over up to $640 into the next year (this limit changes annually and is set by the IRS). Not all employers offer this option, and the amount varies by employer.

A separate option called a grace period lets you spend money from the previous year's account during the first 2.5 months of the new plan year, but this is different from a rollover. Your employer chooses whether to offer a grace period, a carryover, both, or neither.

Key Takeaways

  • FSA money left unspent at the end of the plan year is forfeited unless your employer offers a carryover or grace period.
  • If your employer allows carryover, you can roll over up to $640 of unused FSA funds into the next plan year (the limit changes annually).
  • A grace period allows you to spend the previous year's money during the first 2.5 months of the new year, but the money does not roll over into your new FSA balance.
  • You must check your employer's plan documents or contact your benefits administrator to learn whether carryover, grace period, or both are available to you.
  • Forfeited FSA money cannot be recovered, so tracking your spending throughout the year helps you avoid losing funds.

How carryover works if your employer offers it

If your employer's FSA plan includes a carryover option, any unspent money up to the annual limit rolls into your new FSA account on January 1 (or whenever your new plan year begins). The carryover limit is set by the IRS each year; for 2024 it is $640, and for 2025 it is $660. Your employer cannot allow you to carry over more than this amount, even if you have more money left.

The carryover money sits in your new FSA account and can be spent on the same types of expenses as your new contribution. For a healthcare FSA, that means may be able to access medical, dental, and vision expenses. For a dependent care FSA, it means work-related childcare or adult dependent care costs. The carryover money has no separate deadline; it is simply added to your new year's balance and subject to the same use-it-or-lose-it rule at the end of that year.

Not all employers offer carryover. Some plans include only a grace period, some include only carryover, and some include both. A small number of employers offer neither option, meaning any unspent money is forfeited immediately.

How a grace period works if your employer offers it

A grace period is a 2.5-month window at the start of the new plan year during which you can still spend money from your previous year's FSA account. If your plan year ends on December 31, the grace period runs through March 15 of the following year. During this time, you can submit claims for expenses you incurred in the previous year and have them paid from the old account.

The grace period does not roll money over into your new account. Instead, it extends the deadline for spending the old money. Once the grace period ends, any remaining balance from the previous year is forfeited. Your new FSA account and new contributions are separate and follow their own use-it-or-lose-it deadline.

Grace periods are common, but not universal. Some employers offer both a grace period and carryover, which gives you two ways to avoid losing money. Others offer only one or the other.

What happens to forfeited FSA money

When FSA money is forfeited, it does not go back to you. Your employer retains the unspent balance. Some employers use forfeited FSA funds to pay the administrative costs of running the FSA program. Others may use it to offset the cost of the FSA benefit to the company. In either case, the money is lost to you permanently and cannot be recovered.

This is why tracking your FSA spending throughout the year matters. If you notice in November that you have $300 left and no grace period or carryover option, you have a narrow window to incur and submit claims for may be able to access expenses before the year ends.

How to find out what your employer offers

Your employer's FSA plan document spells out whether carryover, grace period, both, or neither are available. You can find this information in three places: your benefits handbook (usually available on your employer's benefits website or intranet), your FSA plan summary, or by contacting your benefits administrator or HR department directly.

When you contact your benefits team, ask specifically: "Does our FSA plan include a carryover provision, a grace period, or both?" This is a straightforward question with a yes-or-no answer. If the answer is yes to carryover, also ask what the current rollover limit is, since it changes annually.

If you are newly enrolled in an FSA, your enrollment materials should include this information. If you have been enrolled for years, it is still worth confirming, because employers sometimes change their FSA plan terms during open enrollment.

Strategies to avoid losing FSA money

The safest approach is to estimate conservatively. Many people overestimate how much they will spend on may be able to access expenses and end up forfeiting money. Start by looking at your actual spending from the previous year, then add a small buffer for unexpected expenses. If you are unsure, choose a lower amount; you can always increase your contribution next year.

Track your FSA spending throughout the year. Most FSA debit cards show your balance online or through a mobile app. Check it quarterly so you know how much you have left and can plan accordingly. If you are approaching the end of the year with a large balance, you can schedule dental cleanings, vision exams, or other routine care to use the money before it is forfeited.

If your employer offers both a grace period and carryover, you have two layers of protection. The grace period gives you 2.5 extra months to spend the old money, and carryover lets you roll the remainder into the new year. This combination significantly reduces the risk of forfeiture.

Frequently Asked Questions

Can I roll over FSA money if I change jobs?

No. FSA accounts are tied to your employer's plan and do not transfer when you leave. Any unspent money is forfeited when your employment ends, regardless of whether your new employer offers an FSA. You cannot move FSA funds to a new employer's plan or to a personal savings account.

Does the carryover limit apply to both healthcare and dependent care FSAs?

The $640 (or $660 for 2025) carryover limit applies only to healthcare FSAs. Dependent care FSAs have a separate carryover limit of $5,000 per year, set by tax law. Check your plan documents to confirm which limit applies to your account.

If I have a grace period, can I also carry over money?

Yes, if your employer's plan includes both options. You can spend old money during the grace period, and any remainder after the grace period ends can roll over into the new account (up to the annual limit). Some employers offer both, some offer only one, and some offer neither.

What if I submit a claim after the grace period ends?

Claims submitted after the grace period ends cannot be paid from the previous year's FSA account. If you have a new FSA account with a balance, the claim may be paid from that instead. If you have no balance in the new account, the claim will be denied. Always submit claims before the grace period deadline to ensure payment.

Can I get my forfeited FSA money back if I have a medical emergency?

No. Forfeited FSA money cannot be recovered under any circumstances, including medical emergencies. The use-it-or-lose-it rule is final. This is why planning your FSA contribution carefully and tracking your balance throughout the year is important.