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

Money in a Flexible Spending Account (FSA) that you do not spend by the end of the plan year is forfeited — you cannot carry it into the next year. This is a federal rule that applies to almost all FSAs offered through employers. If you have $2,500 in your FSA on December 31 and you have not spent it on may have access to medical or dependent care expenses, that $2,500 is gone.

The only exception is a limited carryover that some employers choose to offer. A small number of plans allow you to roll over up to $640 (in 2024) into the following year. Even then, this carryover amount is set by your employer — they do not have to offer it, and the limit changes each year based on inflation. You should check your plan documents or ask your benefits administrator whether your specific FSA includes this option.

Key Takeaways

  • FSA money you do not spend by December 31 is forfeited under the federal "use it or lose it" rule that applies to most employer plans.
  • Some employers offer a limited carryover of up to $640 (2024 limit) into the next plan year, but this is optional and not all plans include it.
  • The grace period, which gives you an extra 2.5 months to spend money from the prior year, is different from carryover and is also optional.
  • You can change your FSA election or stop contributing during open enrollment or after a may have access to life event, which is the main way to avoid losing money.
  • Unused dependent care FSA funds have the same forfeiture rule as medical FSAs, with the same optional carryover and grace period options.

The difference between carryover and a grace period

Employers can offer one of two ways to help you use your FSA money, but they are not the same thing. A carryover lets you move unused money from one plan year into the next plan year — up to $640 in 2024. A grace period gives you extra time (usually 2.5 months after the plan year ends) to spend money from the year that just ended, before it is forfeited.

Your employer can offer carryover, a grace period, both, or neither. If your plan offers both, you typically use the grace period first to spend the prior year's money, and any amount left after the grace period ends can roll over to the next year (up to the carryover limit). You need to check your plan documents or contact your benefits administrator to know which option your employer has chosen.

Neither carryover nor a grace period is automatic. If your plan does not include one or both of these features, you will lose any unspent money at the end of the plan year.

How to find out whether your plan includes carryover or a grace period

Your employer's benefits administrator or human resources department holds this information. You can ask them directly: "Does my FSA plan include a carryover option or a grace period?" They should be able to tell you yes or no, and if yes, what the limits and dates are.

You can also check your plan's Summary of Benefits and Coverage (SBC) or Summary Plan Description (SPD), which your employer is required to provide. These documents spell out the carryover and grace period rules specific to your plan. If you received these documents when you enrolled, they may be in your email or on your employer's benefits portal.

If you cannot find the documents or reach your administrator, the plan documents are sometimes posted on your employer's intranet or benefits website. Look for sections titled "Plan Rules," "Carryover," or "Grace Period."

What happens to carryover money in the next year

If your plan allows carryover and you roll over $500 from 2024 into 2025, that $500 is available to spend on may have access to expenses during 2025. You spend it the same way you spend your regular 2025 FSA contributions — through your FSA debit card or by submitting receipts for reimbursement. There is no separate account or process; the carryover money sits in your FSA balance alongside your new contributions.

The carryover amount counts toward your total FSA balance for the new year. If you contribute $2,500 in 2025 and you carried over $500 from 2024, your total available balance is $3,000. Any amount you do not spend by the end of 2025 is forfeited again, unless your plan offers another carryover into 2026.

When you lose FSA money even with carryover or a grace period

If you leave your job, resign, or are laid off, you typically lose access to your FSA immediately or at the end of the month, depending on your employer's policy. Any unspent money — including carryover from the prior year — is forfeited when your employment ends. A grace period does not extend beyond your employment date.

If you change to a different health plan during open enrollment but stay with the same employer, your FSA money does not transfer to the new plan. You keep the same FSA account, but you need to make sure you spend the balance before the plan year ends or before the grace period ends, if your plan offers one.

If you have a may have access to life event (marriage, birth of a child, loss of health coverage), you can change your FSA election mid-year. If you lower your contribution amount, you do not lose the money already in the account — you can still spend it. But if you stop contributing entirely, you can only spend what is already there, and any remainder is forfeited at year-end.

How to avoid losing FSA money

The most reliable way to keep from losing money is to estimate your expenses carefully before you contribute. Look at your medical and dependent care costs from the past year, add any new expenses you expect, and contribute only what you are confident you will spend. Many people contribute too much and then lose money at year-end.

If you realize mid-year that you have contributed too much, you can request a change during open enrollment (if it is coming up) or after a may have access to life event. You cannot simply withdraw money or reduce your contribution at random times during the year — the IRS limits when you can make changes. But if you have a may have access to event (job change, birth, marriage, loss of coverage), you can adjust your FSA election.

If your plan offers a grace period, use it. Spend down your FSA balance in the months after the plan year ends, before the grace period deadline. If your plan offers carryover, you have more flexibility, but remember that carryover money is still subject to the "use it or lose it" rule in the following year.

Dependent care FSA and the same rollover rules

Dependent care FSAs (used to pay for childcare, adult day care, or summer camp) follow the exact same "use it or lose it" rule as medical FSAs. Money you do not spend by December 31 is forfeited. Your employer can offer a carryover (up to $640 in 2024) or a grace period, but neither is required.

If you have both a medical FSA and a dependent care FSA through your employer, each account has its own balance and its own carryover or grace period rules. Check your plan documents for each account separately, because they may not be the same.

Frequently Asked Questions

Can I roll over FSA money if I change jobs?

No. When you leave your employer, your FSA account closes and any unspent money is forfeited, even if your new employer offers an FSA. You cannot transfer FSA funds between employers. You can open a new FSA at your new job during open enrollment or if you have a may have access to life event.

What counts as a may have access to life event that lets me change my FSA?

Common may have access to events include marriage, divorce, birth or adoption of a child, death of a spouse or dependent, loss of health coverage, and significant changes in dependent care costs. Your employer's benefits administrator can tell you the full list for your plan. You typically have 30 to 60 days after the event to request a change.

If my plan has a grace period, can I spend money from two different years at the same time?

Yes. During the grace period, you can spend money from the prior year. At the same time, you can also spend money from your current year's contribution. The grace period does not prevent you from using your current year's balance — it just extends the deadline for the prior year's money.

Does the $640 carryover limit apply to both medical and dependent care FSAs?

Yes. If you have both types of FSA, each account can carry over up to $640 (2024 limit) separately. So you could carry over $640 from your medical FSA and $640 from your dependent care FSA in the same year, for a total of $1,280, if your plan allows carryover for both.

What happens to my FSA if I go on unpaid leave?

This depends on your employer's policy. Some employers let you keep your FSA active during unpaid leave; others close it. Contact your benefits administrator before taking unpaid leave to find out whether your FSA will stay open and whether you can still access your balance during that time.