No, a DCFSA does not roll over. Money you contribute to a Dependent Care Flexible Spending Account must be spent on eligible care expenses within your plan year, and anything left after your plan’s deadlines is forfeited. The one exception that comes close to a rollover is an optional 2.5-month grace period your employer may offer, which gives you extra time to incur new expenses against last year’s balance.
Why There Is No Carryover
DCFSAs are governed by Internal Revenue Code Section 125, which sets the rules for cafeteria plans and imposes what benefits professionals call the “use-it-or-lose-it” rule.1Office of the Law Revision Counsel. 26 USC 125 – Cafeteria Plans Contributions have to be spent on eligible dependent care incurred during the plan year. If you don’t use the money in time, you lose it. There is no provision to move the balance into the next year’s account.
This is the point where DCFSAs differ from Health Care FSAs. A Health Care FSA can allow a carryover of up to $680 of unused funds into the next plan year if the employer permits it.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 DCFSAs have no equivalent. The Consolidated Appropriations Act of 2021 briefly let employers permit DCFSA carryovers through plan years ending in 2022, but that pandemic-era relief has expired. Today, no rollover of any kind is allowed.
The 2.5-Month Grace Period
The closest thing to a rollover is the grace period your employer may choose to add to the plan. Under IRS Notice 2005-42, a cafeteria plan can be amended to give participants up to two and a half additional months after the plan year ends to incur new eligible expenses using leftover funds.3Internal Revenue Service. Notice 2005-42 For a plan year that ends December 31, the grace period runs through March 15.
During those extra weeks, you can pay for new childcare or adult daycare and apply your prior-year balance to it. The money does not move into a new-year account, so it isn’t a true rollover. You’re simply given more time to spend down last year’s balance on newly incurred qualifying expenses. Whatever remains after March 15 is forfeited.
Not every plan offers a grace period. Check your Summary Plan Description or ask your benefits administrator. If your employer has not adopted one, your spending deadline is the last day of the plan year, usually December 31, with no extension for new expenses.
Run-Out Period: Extra Time to File, Not to Spend
A run-out period is a different deadline and easy to confuse with a grace period. It gives you extra time to submit reimbursement paperwork for expenses you already incurred during the plan year. It does not let you spend on new services.
Many employers set a run-out period of about 90 days after the plan year ends, though the exact length varies. Some federal employee plans use an April 30 claims deadline.4FSAFEDS. Does My DCFSA Have a Grace Period Miss the run-out deadline and your claim will be denied, even if the expense was eligible and money was sitting in the account. When you file, you’ll need the care provider’s name, address, and taxpayer identification number (their Social Security number or Employer Identification Number), along with the dates of care.5Internal Revenue Service. Publication 503 – Child and Dependent Care Expenses
What Happens to Money You Forfeit
Any balance left after the grace period (if you have one) and the run-out period expire is permanently forfeited. It is not refunded to you. Treasury regulations do not allow employers to return the money to the participant who lost it, because that would undermine the pre-tax treatment of the original contribution.
Employers generally have a couple of options for the forfeited money. They can keep it to offset administrative costs of running the FSA program, or they can use it to reduce plan contributions for participants in the following year on a reasonable and uniform basis. The specifics depend on your plan document. Either way, you don’t get the money back.
Leaving Your Job Before Year-End
DCFSAs are not eligible for COBRA continuation. Once you leave your employer, you can no longer contribute to the account. You can still submit claims against your remaining balance for eligible expenses incurred through the end of the plan year or until the balance is exhausted, whichever comes first.6FSAFEDS. FAQs – Separation and Retirement
The grace period is generally reserved for participants who are actively employed and contributing through December 31.6FSAFEDS. FAQs – Separation and Retirement If you separate mid-year, you likely lose the extended window for incurring new expenses, so file claims promptly for anything incurred before your last day. A DCFSA at a new employer is a separate account; balances don’t transfer between plans.
Planning Around the 2026 Limit
The One Big Beautiful Bill Act raised the DCFSA contribution limit for the first time in decades. For taxable years beginning in 2026, you can exclude up to $7,500 per household from gross income through a dependent care assistance program, or $3,750 if you’re married filing separately.7Office of the Law Revision Counsel. 26 USC 129 – Dependent Care Assistance Programs The old $5,000 limit had been in place since 1981, with a temporary bump to $10,500 during the pandemic.
Contributions come out of your paycheck pre-tax, which lowers the wages reported in Box 1 of your W-2, and the total DCFSA benefit shows up in Box 10. Anything you contribute above the $7,500 cap gets added back to taxable wages.5Internal Revenue Service. Publication 503 – Child and Dependent Care Expenses Because unspent funds are forfeited, the higher limit raises the stakes on your election. Overestimate your care costs and you can lose thousands in pre-tax dollars with no rollover to soften the loss. A conservative approach is to elect close to what you know you’ll spend, and rely on the grace period only as a cushion, not a plan.