What Happens If You Don't Spend Your FSA?

You contributed money to your FSA all year. Payday after payday, pre-tax dollars were deducted from your paycheck and set aside. But now your plan year is ending and you still have a balance. What actually happens to that money?

What Is the FSA "Use It or Lose It" Rule?

The IRS requires that FSA funds be used for eligible expenses incurred during the plan year (or applicable grace period). Any funds not used within the allowed timeframe are forfeited. This is the fundamental rule that governs FSAs under IRS Section 125 and the reason they require more careful planning than HSAs.

Where Does Forfeited FSA Money Go?

Your forfeited FSA money goes back to your employer. Not to you, not to a charity, not to the government — to the entity that employed you.

Employers can use forfeited FSA funds to:

• Offset the costs of administering the FSA plan
• Reduce future employee contributions
• Subsidize other employee benefits
• In some cases, simply absorb it as a financial gain

According to Employee Benefit Research Institute (EBRI) estimates, American workers forfeited approximately $4.5 billion in FSA funds in 2025. The average forfeiture per person was $441. That's money people earned and never got to use.

What Safety Nets Exist to Protect Unspent FSA Funds?

The IRS allows employers to offer one of two protections against total forfeiture. Not all employers offer them, and employers can only offer one — not both.

What is the FSA carryover option?

Your employer may allow you to carry over up to $660 of unused FSA funds into the next plan year (per IRS Revenue Procedure 2024-40 for 2026). This money is available immediately and doesn't count against your new $3,400 contribution limit.

• Only the first $660 is protected — any amount above that is forfeited.
• The carryover is automatic; you don't need to do anything special.
• If you have $1,500 left, you carry over $660 and lose $840.

What is the FSA grace period option?

Instead of carryover, your employer may offer a grace period — typically 2.5 months after the plan year ends (until March 15 for calendar-year plans). During this period, you can spend your entire remaining balance on eligible expenses.

• No dollar cap — the full balance carries into the grace period.
• But if you still have a balance after the grace period ends on March 15, it's all forfeited.
• Expenses must be incurred during the grace period, not just submitted.

What if my employer offers neither?

Some employers offer neither carryover nor grace period. In this case, every dollar not spent by the last day of your plan year (typically December 31) is gone. If your employer falls in this category, you need to be especially vigilant about tracking your spending.

How Do I Find Out What My FSA Plan Offers?

1. Check your benefits portal. Most employers list FSA plan details in their benefits enrollment system.
2. Read your Summary Plan Description (SPD). This document (required by ERISA) spells out all plan rules including carryover or grace period provisions.
3. Ask HR directly. A quick email to your benefits administrator: "Does our FSA plan offer carryover or a grace period?"
4. Check your FSA administrator's website. Companies like HealthEquity, WEX, or your employer's platform typically display this information.

How Much FSA Money Do People Actually Lose?

Here are realistic forfeiture scenarios based on different plan types:

Scenario	Balance Left	Plan Type	Amount Forfeited
Sara	$500	$660 carryover	$0 (all carries over)
Mike	$1,200	$660 carryover	$540
Lisa	$800	Grace period (ends March 15)	$0 if she spends by March 15; $800 if she doesn't
Tom	$2,000	No protection	$2,000

What Can I Buy to Spend My FSA Before It Expires?

If your deadline is approaching and you still have a balance, here are smart ways to spend it down fast:

• Schedule dental work: Cleanings ($75-200), fillings ($100-300), and night guards ($300-800) are all FSA-eligible.
• Buy prescription eyeglasses or sunglasses: One pair can run $200-500.
• Stock up on OTC medications: Allergy meds, pain relievers, cold medicine, sleep aids — all eligible without a prescription since the CARES Act of 2020.
• Buy sunscreen in bulk: All SPF 15+ sunscreen is FSA-eligible.
• Get a new pair of contacts: Annual supply of contacts can be $200-600.
• Consider LASIK: If you've been thinking about it, LASIK is fully FSA-eligible at $2,000-4,000 per eye and can use your entire balance.
• Buy first aid supplies: Kits, bandages, thermometers, blood pressure monitors.

How Can I Avoid Losing My FSA Money?

Forfeiture usually happens because people forget about their FSA until it's too late. The fix is simple: know your balance and have a plan.

SpendRebel tracks your FSA balance in real time, calculates exactly how much is at risk of forfeiture, and sends escalating reminders so you're never caught off guard. It takes 2 minutes to set up and it's completely free. Start now — before your balance becomes your employer's windfall.

Frequently Asked Questions

Can I get forfeited FSA money back?

No. Once FSA funds are forfeited, the decision is final. There is no appeals process, no exception, and no way to recover the money. The funds revert to your employer permanently.

Does my FSA balance reset to zero every year?

It depends on your plan. If your employer offers a carryover, up to $660 rolls into the next year. If your employer offers a grace period, you have until March 15 to spend the remaining balance. If neither is offered, your balance resets to zero on January 1.

Can I use next year's FSA to cover this year's expenses?

No. FSA funds can only be used for expenses incurred during the plan year the funds were elected for (plus any applicable grace period). You cannot use 2027 FSA funds to pay for 2026 expenses.

What is the FSA forfeiture deadline for calendar-year plans?

For calendar-year FSA plans, the plan year ends December 31. If your employer offers a grace period, you have until March 15 of the following year to incur expenses. Claims must typically be submitted within 90 days after the plan year ends or the grace period ends.