FSA money does not roll over automatically — most of it disappears if you do not spend it by the important date

A Flexible Spending Account (FSA) rollover is not a standard feature. The default rule is "use it or lose it": money left in your FSA at the end of the plan year is forfeited. However, your employer may offer one of two limited options that function like rollovers, and understanding which one (if any) applies to your account matters because the rules are strict and the important date are firm.

The two options are a carryover (which lets you move unused money into the next year, up to a cap set by the IRS) and a grace period (which extends your spending important date by two and a half months). A few employers offer both. Most offer neither, which means any money left unspent on December 31 is gone.

Key Takeaways

  • FSA money does not automatically carry over to the next year; most employers follow the "use it or lose it" rule unless they have chosen to offer a carryover or grace period.
  • A carryover allows you to move up to $640 (for 2024) of unused FSA funds into the next plan year, but only if your employer has adopted this option.
  • A grace period extends your spending window by two and a half months into the next calendar year, but you cannot combine a grace period with a carryover in the same plan year.
  • You must check your plan documents or ask your benefits administrator to know which option, if any, your employer offers.

Carryover: Moving money to next year with a dollar cap

If your employer offers a carryover, you can move unused FSA funds into the next plan year. The IRS sets an annual cap on how much you can carry over. For 2024, that cap is $640. For 2025, it is $680. The cap changes each year based on inflation.

The carryover amount is calculated on your plan's anniversary date, not the calendar year. If your plan runs January through December and you have $800 left on December 31, you can carry over $640 and lose $160. If you have $500 left, you carry over all $500.

Carryover money sits in a separate "prior-year" balance within your FSA. You spend it down before you spend current-year money. If you do not spend the carryover by the end of the next plan year, it is forfeited — there is no second carryover unless your employer allows it for multiple years in a row, which is rare.

Grace period: Extra time to spend this year's money

A grace period gives you an additional two and a half months after your plan year ends to spend money from that year. If your plan year ends December 31, the grace period runs through March 15 of the following year. You spend down the current-year balance during this window; any money left on March 15 is forfeited.

A grace period does not move money into the next plan year the way a carryover does. It straightforward extends the important date for spending it. Once the grace period ends, the money is gone, and your new plan year begins with a fresh FSA balance.

You cannot use both a carryover and a grace period in the same plan year. Your employer chooses one or the other, or neither. If your plan offers a grace period, you do not get a carryover option.

How to find out what your employer offers

Your plan documents spell out whether a carryover, grace period, or neither applies to your account. These are usually called the Summary Plan Description (SPD) or the plan rules, and your benefits administrator or HR department can send them to you by email or direct you to an employee benefits portal where they are posted.

The fastest way is to call or email your benefits administrator and ask: "Does my FSA plan offer a carryover, a grace period, or neither?" They can answer in one sentence. Do not assume based on what a coworker's plan offers — rules vary by employer.

If you are changing jobs or retiring, your old employer's FSA does not roll over to a new employer's FSA. You forfeit any remaining balance when your employment ends, unless a grace period is still active and you are within the spending window. Some employers allow you to continue spending during an active grace period even after you leave, but this is not standard — ask before you resign.

What counts as an may be able to access expense during a carryover or grace period

may be able to access expenses are the same whether you are spending current-year money or carryover money. They include copays, deductibles, coinsurance, prescription drugs, over-the-counter medications (with a prescription), dental work, vision care, and certain medical equipment. The IRS publishes a full list in Publication 502.

Expenses must be incurred (the service or purchase must happen) during the plan year or grace period to count. If your plan year ends December 31 and you have a grace period through March 15, a doctor visit on February 1 counts, but a visit on March 20 does not. The date you pay the bill does not matter — only the date the expense was incurred.

Dependent care FSA carryover rules are different

A Dependent Care FSA (DCFSA) has its own carryover rule. The IRS allows you to carry over up to $5,000 of unused dependent care FSA money into the next plan year. This is higher than the medical FSA cap because dependent care expenses are often harder to predict.

The same "use it or lose it" default applies: if your employer does not offer a carryover, the money is forfeited. Ask your benefits administrator whether your dependent care plan includes a carryover option, because it is separate from your medical FSA carryover.

What happens if you overestimate and have money left

If you contribute more than you spend and your plan does not offer a carryover or grace period, that money is lost. This is why many people contribute conservatively to FSAs — the penalty for overestimating is steep.

If your plan does offer a carryover or grace period, you have a second chance to spend the money. During a carryover year, track your prior-year balance and plan expenses accordingly. During a grace period, set a reminder for the important date (usually mid-March) so you do not accidentally forfeit money you could have used.

Frequently Asked Questions

Can I roll over FSA money if I change jobs?

No. FSA money is tied to your employer's plan and does not transfer to a new employer. When you leave your job, any remaining FSA balance is forfeited, even if you are mid-plan year. A grace period may still be active after you leave, allowing you to spend money through the grace period important date, but this varies by plan.

What if I have money left and my plan does not offer a carryover or grace period?

The money is forfeited. This is the "use it or lose it" rule. You cannot recover it or move it anywhere. This is why it is important to estimate your expenses carefully when you enroll and to know your plan's rules before the plan year ends.

Can I carry over money multiple years in a row?

Only if your employer's plan allows it. Most plans allow a one-time carryover, meaning you can carry over money from year one to year two, but if you do not spend it in year two, it is forfeited. Some employers allow rolling carryovers year after year, but this is uncommon. Check your plan documents.

Does a grace period mean I can spend money on anything during those extra months?

No. may be able to access expenses are the same during a grace period as they are during the regular plan year. The grace period only extends the important date for spending on may have access to medical, dental, vision, and dependent care expenses. Ineligible purchases still do not count.

If my plan offers both a carryover and a grace period, can I use both?

No. Your employer chooses one or the other, not both. If your plan has a grace period, you do not get a carryover option for that plan year. The two are mutually exclusive under IRS rules.