FSA accounts do not roll over to the next year — you lose any money you don't spend by December 31

The use-it-or-lose-it rule is the defining feature of Flexible Spending Accounts. Money you set aside in an FSA is forfeited if you don't use it within the plan year. Unlike a Health Savings Account (HSA), which lets you carry your balance forward indefinitely, an FSA balance does not transfer to the next calendar year under federal tax law.

This rule exists because FSAs are tax-advantaged accounts. The IRS allows you to set aside pre-tax dollars specifically to encourage you to plan your healthcare spending. The tradeoff is that you cannot hoard the money — you must spend it on may be able to access medical expenses within the plan year or forfeit it.

Some employers offer a grace period or a carryover option that softens this rule slightly, but these are exceptions, not the standard. You need to know which option your employer's plan uses before the year ends.

Key Takeaways

  • Money left in your FSA on December 31 is forfeited and cannot be carried to the next year under the standard federal rule.
  • Some employers allow a 2.5-month grace period into the following year to spend remaining FSA funds, or permit a carryover of up to $610 (the amount varies by year).
  • You must check your plan documents or ask your benefits administrator which option your employer uses — do not assume you have either one.
  • Receipts for FSA purchases do not expire; you can submit claims for may be able to access expenses from earlier in the year right up until the important date.

The Standard Rule: Use It or Lose It by December 31

Under the default FSA rules set by the IRS, any balance remaining in your account on December 31 is gone. Your employer cannot return it to you, and you cannot roll it into an HSA or any other account. The money is forfeited and typically goes back to your employer's health plan to offset costs.

This applies even if you contributed the money yourself through payroll deductions. The account is tied to the plan year, not to you personally. When the plan year ends, the account ends with it.

The forfeiture happens automatically. You do not have to do anything — and you cannot prevent it by requesting a refund or a transfer. Once December 31 passes, the money is no longer yours.

Grace Periods: An Extra 2.5 Months to Spend

Some employers add a grace period to their FSA plan. This allows you to spend money from the previous year's account during the first 2.5 months of the new year (typically January 1 through March 15). Any balance still remaining after the grace period ends is forfeited.

A grace period is optional for employers. They can choose to offer one, but they are not required to. If your employer offers a grace period, it will be stated in your plan documents or benefits summary. Ask your benefits administrator or HR department whether your plan includes one.

The grace period applies only to claims submitted during those months — the expenses themselves must still have occurred in the previous plan year. You cannot use grace period money to pay for services in January or February of the new year; you can only submit claims for may be able to access expenses you already incurred in the prior year.

Carryover Options: Up to $610 Rolls Forward

A second option some employers use is a carryover. This allows you to carry forward a limited amount of unused FSA funds into the next plan year. The IRS sets an annual limit on how much can be carried over — currently $610 for 2024, though this amount adjusts each year for inflation.

Like the grace period, a carryover is optional. Your employer decides whether to offer it. If they do, the amount you can carry over is capped at the IRS limit, even if you have more than that remaining. Any balance above the limit is still forfeited.

Carryover money counts toward your contribution limit in the new year. If you carry over $500 and your employer's plan allows a $3,300 contribution for the new year, you can only contribute an additional $2,800 in new money.

How to Find Out Which Option Your Plan Uses

Your employer's benefits summary or plan document will state whether your FSA includes a grace period, a carryover, both, or neither. This information is usually in the Summary of Benefits and Coverage (SBC) or the plan's Summary Plan Description (SPD).

If you cannot find it in writing, contact your benefits administrator or HR department directly. Ask them: "Does my FSA plan include a grace period, a carryover, or neither?" Get the answer in writing if possible, so you have it for reference.

Do not assume your plan has either option. Many employers use the standard use-it-or-lose-it rule with no exceptions. Knowing which applies to you is essential for planning your spending in December.

How to Avoid Losing Money Before Year-End

The best strategy is to estimate your may be able to access medical expenses for the year and contribute only what you expect to spend. This is difficult because healthcare is unpredictable, but it is the only way to avoid forfeiture.

In the final weeks of the year, review what you have spent and what you have left. If you have a balance remaining and your plan has no grace period or carryover, spend it on may be able to access expenses before December 31. Common last-minute purchases include over-the-counter medications, glasses, dental work, or vision care.

You can also submit claims for expenses you already incurred earlier in the year but have not yet claimed. If you paid out of pocket for may be able to access medical expenses in September, you can submit that receipt in December and use your remaining FSA balance to reimburse yourself.

What Happens If You Change Jobs or Lose Coverage

If you leave your job or lose health coverage mid-year, your FSA account closes when ready. You forfeit any remaining balance, even if your former employer's plan normally includes a grace period or carryover.

The exception is if you have a may have access to life event — such as losing coverage due to termination, a divorce, or a reduction in hours — you may be able to claim a refund of contributions you made after the date of the event. This varies by plan and by state. Contact your benefits administrator to ask whether your situation qualifies.

If you move to a new job with a new FSA, the two accounts are separate. You cannot transfer money from your old FSA to your new one. Your old account closes on your last day of coverage, and your new account starts on your first day at the new employer.

Frequently Asked Questions

Can I carry over FSA money to next year if I don't use it?

Only if your employer's plan includes a carryover option, and only up to the IRS limit (currently $610). Most plans do not offer this. Check your plan documents or ask your benefits administrator. If your plan has no carryover and no grace period, any unused balance is forfeited on December 31.

What if I have a grace period — can I use it for new expenses in January?

No. A grace period lets you submit claims for expenses you already incurred in the prior year, not for new expenses in the new year. The expense must have occurred before December 31 of the prior plan year, even if you submit the claim in January or February.

Do receipts for FSA purchases expire?

No. You can submit a receipt for an may be able to access expense from any time in the plan year, even if you submit it in December. This is a common way to use up remaining FSA balance before year-end — gather receipts from earlier months and claim them all at once.

What counts as an may be able to access FSA expense?

may be able to access expenses include copays, deductibles, prescriptions, glasses, contacts, dental work, and many over-the-counter medications and medical supplies. Items like cosmetic procedures, gym memberships, and vitamins do not may have access to. Your plan documents list may be able to access expenses, or you can check the IRS Publication 502 for a full list.

If I don't use my FSA money, where does it go?

Forfeited FSA money goes back to your employer's health plan to help offset the cost of coverage for all employees. You do not receive it as a refund, and it cannot be transferred to another account. It is straightforward lost.