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FSA Deadlines: What Employees Can Still Do with Remaining Funds

December 31 is a common deadline for many Flexible Spending Account (FSA) plans—but not all FSAs follow the calendar year. Some operate on a different plan year with their own deadlines. That’s why understanding your specific plan rules is critical. If you don’t use your FSA funds within the allowed timeframe, any remaining balance may be forfeited.

An FSA, also known as a Flexible Spending Account, is an employer-sponsored benefit that allows you to set aside pre-tax dollars through payroll deductions to pay for eligible healthcare expenses. These accounts can be used for a wide range of costs, including:

  • Copayments and deductibles
  • Prescription medications and certain over-the-counter drugs
  • Dental and vision care expenses
  • Other qualified healthcare services and products

One of the biggest advantages of an FSA is the tax savings. Because contributions are made before taxes are taken out, you reduce your taxable income and save the amount you would have otherwise paid in federal, state, and payroll taxes.

Understanding Your FSA Deadline

The first step in managing your FSA is confirming when your employer’s plan year ends. While most FSA plans operate on a calendar year ending December 31, some employers follow a different schedule, which can affect your deadlines.

Once you know your plan year, it’s important to understand which (if any) post-plan-year provision your employer offers. FSA plans may include either:

  • A grace period provision, which provides up to 2.5 additional months to use leftover funds, or
  • A carryover provision, which allows you to roll over a limited amount into the next plan year

Employers may offer one of these options—but not both.

What Is an FSA Grace Period?

A grace period gives employees extra time to use remaining FSA funds after the plan year ends. For plans that offer this feature, unused funds from the prior year can be applied to eligible expenses incurred up to the first 2.5 months of the following year. However, once the grace period ends, any unused funds are forfeited.

During the grace period:

  • Claims are automatically paid from the prior year’s remaining balance first
  • If you use an FSA debit card, those leftover funds remain available through the end of the grace period
  • Once prior-year funds are exhausted, expenses are applied to the current plan year

Example:

Suppose your plan year ends on December 31, 2025, you have $150 remaining in your FSA, and your employer offers a grace period through March 15, 2026. On February 5, 2026, you incur $400 in eligible medical expenses. After you submit your claim:

  • The remaining $150 from the 2025 plan is used first for reimbursement
  • The remaining $250 is reimbursed from the 2026 FSA funds

Grace Period vs. Carryover: What’s the Difference?

Instead of a grace period, some employers allow a carryover. A carryover lets you roll over a set amount of unused funds into the next plan year, with no deadline on when those funds must be spent.

If your employer offers a carryover, employees may roll over up to $660 from a 2025 plan or up to $680 from a 2026 plan into the next plan year. Annual contribution limits still apply, meaning you cannot exceed the annual FSA contribution maximum even with carryover funds. These limits are determined by the IRS and are updated annually.

What Is a Run-Out Period?

Most FSA plans include a run-out period, which typically provides 30 to 90 days after the plan year ends for employees to submit claims and receipts for eligible expenses incurred during the plan year. A run-out period may be offered in addition to either a grace period or a carryover, depending on the plan design.

The run-out period does not allow employees to incur new expenses. Instead, it simply gives employees extra time to gather documentation and file claims for reimbursements. This can be especially helpful for employees who incur medical, dental, or vision expenses late in the plan year and need additional time to receive bills or explanations of benefits.

What Counts as an Eligible Medical Expense?

FSA funds can be used for expenses related to:

  • Diagnosing
  • Curing
  • Mitigating
  • Treating
  • Preventing disease
  • Treatments affecting any part or function of the body

Eligible expenses include eye exams, glasses and contact lenses, fertility treatments, hearing aids, breast pumps, birth control, and even guide dog expenses for individuals with disabilities. Certain inpatient treatment costs, including meals and lodging at addiction treatment centers, may also qualify.

One important rule to remember: FSA funds must be used for expenses incurred during the current plan year. The main exception is orthodontic treatment, which can be reimbursed even if braces were placed before the start of the plan year.

Planning Ahead to Avoid Forfeitures

The best way to avoid losing FSA funds is to plan ahead. When deciding how much to contribute for the upcoming year, consider:

  • Expected medical procedures
  • Ongoing prescription medications
  • Routine checkups
  • Dental and vision care
  • Preventive screenings

Life events such as starting a family, getting married, or experiencing a divorce can also significantly impact healthcare spending.

Online FSA calculators can help estimate future medical costs by factoring in past spending and anticipated changes. Taking time to evaluate these details can help you choose a contribution amount that maximizes tax savings while minimizing the risk of unused funds.

Final Takeaway

FSAs offer valuable tax advantages, but they come with strict timing rules. Understanding your plan’s deadline, whether you have a grace period or carryover, and how eligible expenses work can help you make the most of your contributions. With thoughtful planning and awareness, you can turn your FSA into a powerful tool for managing healthcare costs—without leaving money on the table.

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