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FSA Rollover and Grace Period — Don't Forfeit Your Healthcare FSA

Difficulty Easy Risk None Applies To All Potential Savings $200–$640 per year in funds that would otherwise be forfeited Last Verified 2026-04-04

FSA Rollover and Grace Period — Don’t Forfeit Your Healthcare FSA

What Is It?

A Healthcare Flexible Spending Account (FSA) lets you set aside pre-tax dollars to pay for eligible medical expenses — saving 22–37% on everything from prescriptions to glasses to dental work. The catch: FSAs are “use it or lose it.” Money not spent by the plan deadline is forfeited back to your employer. But two relief options can protect your balance — and millions of employees forfeit money each year by not knowing which option their plan offers.

The Two Relief Options

Option 1: Rollover (Carryover) Your employer can allow you to roll over up to $640 (2024 limit, indexed annually) of unused FSA funds into the next plan year. The rolled-over funds are available on day one of the new year. There’s no grace period for spending — the money is simply available alongside your new year’s contributions.

Option 2: Grace Period Your employer can instead offer a 2½-month grace period (ending March 15 for calendar-year plans). During this window, you can use prior-year FSA funds to pay for expenses incurred in the new year. The grace period is all-or-nothing — your employer either offers it or not, and you can use any amount of your remaining balance (not capped at $640).

Important: Employers can only offer one option — rollover OR grace period — not both. And they can offer neither, giving you a hard deadline.

How to Find Out What Your Plan Offers

Check your Summary Plan Description (SPD) or contact your HR department. Your FSA administrator’s website (HealthEquity, WageWorks/Health-E Commerce, Optum, etc.) will also show your plan’s deadline rules when you log in.

What to Spend Your FSA On Before the Deadline

If you have a remaining balance near year-end, eligible purchases include:

  • Eyeglasses, contact lenses, and contact lens solution
  • Prescription medications and insulin
  • Dental treatments (fillings, crowns, orthodontia, cleanings)
  • Hearing aids and batteries
  • Acupuncture, chiropractic care
  • Sunscreen (SPF 15+)
  • Menstrual care products (since 2020)
  • Over-the-counter medications without a prescription (since 2020 CARES Act)
  • First aid kits, blood pressure monitors, thermometers
  • Fertility treatment and birth control

What Most People Don’t Know

  • FSA and HSA cannot be combined. If you have an HSA (Health Savings Account) with an HDHP, you generally cannot also have a general-purpose FSA. You can have a “Limited Purpose FSA” restricted to dental and vision only.
  • Dependent Care FSAs have no rollover. The rollover and grace period options only apply to Healthcare FSAs. Dependent Care FSAs are strictly use-it-or-lose-it by the plan deadline (or up to the grace period if the employer offers one for that plan — rare).
  • Your employer keeps forfeited funds. Forfeitures reduce the employer’s cost of offering the plan. Some employers use forfeitures to fund their FSA administrative costs; others return it pro-rata to non-forfeiting employees.
  • You can change your FSA election mid-year after certain qualifying life events (marriage, divorce, birth of a child, change in employment status) under IRS Section 125 rules.

Frequently Asked Questions

What happens to my FSA if I leave my job mid-year?

FSA funds are forfeited when you leave — unless your employer extends COBRA coverage to your FSA (not all do). Notably, a key asymmetry: you can access your full annual FSA election on day one of the plan year even if you’ve only contributed a fraction of it. If you leave after spending more than you’ve contributed, you don’t owe the difference back.

Can I use my FSA for my spouse’s or dependent’s expenses?

Yes — FSA funds can be used for your spouse’s and any eligible dependents’ qualified medical expenses, even if they’re covered under a different health plan.

The IRS increased the FSA rollover limit. How do I know the current amount?

The rollover limit is indexed to inflation and updated annually in an IRS Revenue Procedure. The 2024 limit is $640; for 2025 it increased to $660. Confirm your plan year’s limit in your Summary Plan Description or with your FSA administrator.

I lost my FSA debit card. Can I still get reimbursed?

Yes — submit a paper or online reimbursement claim with a receipt showing the date, provider, amount, and nature of the expense. Most FSA administrators allow claims up to 90 days after the plan year ends (or grace period ends), regardless of whether you use the debit card.

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