FSA funds do not roll over — what you don't spend by December 31 is forfeited

A Flexible Spending Account (FSA) operates under a "use-it-or-lose-it" rule set by the IRS. Any money you contribute but do not spend on may have access to medical expenses during the plan year is gone at year-end. The IRS does not allow FSA balances to carry forward to the next calendar year, with one narrow exception: a carryover provision that lets employers permit up to $640 (in 2024) to roll into the following year.

Whether your employer allows this carryover depends entirely on your plan document. Not all employers offer it, and those who do set their own rules about how much you can carry over and whether you can carry over unused funds at all. You cannot choose to roll over money on your own — your employer either built this option into your plan or they did not.

Key Takeaways

  • FSA money you do not spend by December 31 is forfeited unless your employer's plan includes a carryover provision.
  • If your plan allows carryover, the maximum you can roll over is $640 in 2024, though your employer may set a lower limit.
  • Carryover funds must be spent during the following plan year and are subject to the same use-it-or-lose-it rule.
  • You should review your plan documents or ask your benefits administrator whether your FSA allows carryover before year-end.
  • The IRS updates the carryover limit annually, so the amount that can roll over may change each year.

The carryover limit and how it works

The IRS sets an annual cap on how much FSA money can roll over to the next year. For 2024, that limit is $640. This means if your employer's plan permits carryover, you can carry forward no more than $640 of unused funds. Your employer may choose to allow less — for example, some plans cap carryover at $500 or $300 — but they cannot exceed the IRS limit.

Carryover is not automatic. Your employer decides whether to offer it at all. If your plan includes carryover, any unused balance up to the limit rolls forward on January 1. Money that exceeds the carryover limit is forfeited. For example, if you have $700 unused and your plan allows the full $640 carryover, you lose $60.

The carryover limit changes each year because the IRS adjusts it for inflation. In 2023, the limit was $610. In 2025, it will likely be higher. Your benefits administrator or plan documents will tell you the current year's limit.

The grace period alternative

Some employers offer a grace period instead of carryover. A grace period gives you an extra 2.5 months (through March 15 of the following year) to spend money from the previous year's FSA. This is a different mechanism from carryover: the money stays in the old plan year's account, but you have more time to use it.

An employer can offer carryover, a grace period, or neither — but not both. If your plan has a grace period, you do not get carryover, and vice versa. A grace period is often more valuable than carryover because you can spend the full unused balance, not just up to the annual cap. However, fewer employers offer grace periods than offer carryover.

Check your plan documents or benefits summary to see which option your employer chose. The distinction matters: if you have $700 unused and your plan offers a grace period, you can spend all $700 by March 15. If your plan offers carryover instead, only $640 (or your plan's lower limit) rolls over.

How to learn about your plan allows carryover

Your employer's benefits administrator or human resources department maintains your FSA plan document, which states whether carryover or a grace period is allowed. You can request this document directly, or you can ask your HR contact a straightforward question: "Does our FSA plan allow carryover or a grace period?"

Your benefits summary or plan materials — usually provided during open enrollment — may also state this. Look for language like "carryover provision," "grace period," or "use-it-or-lose-it." If the materials do not mention either option, your plan likely does not allow carryover or a grace period, meaning any unused balance is forfeited.

Do not assume based on what a coworker's plan offers. FSA rules are set by each employer, and two companies in the same industry can have completely different carryover policies.

What happens to carryover funds in the new year

If your plan allows carryover and you have unused funds, those funds roll into your FSA on January 1 of the next year. They are added to your new annual contribution and sit in the same account. You spend them the same way — submitting receipts for may have access to medical expenses or using an FSA debit card — and they are subject to the same use-it-or-lose-it rule.

Carryover funds do not earn interest and do not have any special status. They are straightforward part of your available balance for the new plan year. If you do not spend the carryover amount by December 31 of the new year, it is forfeited (unless your plan again allows carryover into the following year).

Strategies to avoid losing FSA money

If your plan does not allow carryover or a grace period, you need to estimate your medical spending carefully. Overestimating means money is forfeited; underestimating means you pay out of pocket for expenses you could have covered with pre-tax dollars.

Review your past year's medical expenses — copays, deductibles, prescriptions, dental work, vision care — to get a realistic picture. Include expenses for your spouse and dependents if they are covered under your plan. Many people forget about predictable costs like annual eye exams, dental cleanings, or prescription refills.

If you are unsure, contribute a smaller amount rather than a larger one. You can always increase your contribution next year. Some employers also allow mid-year changes if you have a may have access to life event, such as marriage, birth, or a change in your spouse's coverage.

If you are near year-end and have unused funds, spend them on may have access to expenses you know are coming: stock up on over-the-counter medications, schedule dental work, or pay for vision care. The IRS maintains a list of may have access to FSA expenses on its website.

Frequently Asked Questions

Can I roll over FSA money to a Health Savings Account?

No. FSA and HSA are separate accounts with different rules. Money in an FSA cannot be transferred to an HSA. If you leave your job or lose FSA coverage, any unused balance is forfeited (unless your plan allows carryover into the next year). If you switch to an HSA-may be able to access health plan, you start fresh with a new HSA account.

What if I change jobs — do I lose my FSA balance?

Yes. FSA accounts are tied to your employer's plan. If you leave your job, your FSA account closes, and any unused balance is forfeited, regardless of whether your previous employer allowed carryover. You cannot take the money with you or transfer it to a new employer's FSA.

Does the carryover limit explore to dependent care FSAs?

No. The $640 carryover limit applies only to healthcare FSAs. Dependent care FSAs have their own rules and do not allow carryover at all — unused dependent care FSA funds are always forfeited at year-end.

If my plan allows carryover, is it automatic or do I have to request it?

Carryover is automatic if your plan allows it. You do not need to request it or take any action. On January 1, any unused balance up to your plan's carryover limit rolls forward into your new account.

Can my employer change the carryover policy mid-year?

Your employer cannot change the carryover policy for the current plan year once it has started. However, they can change it for the following year. If your employer eliminates carryover for next year, you would be notified during open enrollment.