HSA balances roll over automatically every year with no cap and no deadline; FSA balances do not, and any money left in a health FSA at the end of the plan year is forfeited unless your employer has added one of two IRS-approved relief provisions. So the short answer to whether an FSA or HSA rolls over is: the HSA always does, the FSA usually doesn’t, and when it does the rollover is capped. For 2026, the most an employer can let you carry over from a health FSA is $680.
The FSA Default Is Use It or Lose It
A health FSA operates under Internal Revenue Code Section 125, which treats the account as part of an employer’s cafeteria plan rather than as money you own. Any balance sitting in your FSA when the plan year ends goes back to your employer unless the plan includes a specific relief provision. The IRS built this forfeiture rule to keep FSAs functioning as short-term spending accounts, not tax shelters.
Your employer can soften the deadline in one of two ways, and federal rules prohibit offering both at the same time.
- Carryover. The plan lets you roll a limited dollar amount into the next plan year. For 2026, the IRS caps this at $680. Anything above that amount is forfeited. The carried-over balance does not reduce your new election, so you can still contribute the full annual amount on top of the rollover.
- Grace period. The plan gives you an extra two and a half months after the plan year ends to incur new expenses against the old balance. For a calendar-year plan, that window typically runs through March 15. Anything unspent when the grace period closes is gone.
If your employer offers neither option, every dollar left in the FSA disappears the moment the plan year ends. Many people don’t know which provision their plan uses until it’s too late to spend down a large balance. Checking your plan’s summary document in October or November gives you enough time to schedule dental work, order glasses, or stock up on eligible over-the-counter supplies before the deadline hits.
Dependent Care FSAs Follow Slightly Different Rules
Dependent care FSAs share the same employer-sponsored structure as health FSAs but the rollover rules aren’t identical. These accounts, which cover expenses like daycare and after-school programs for children under 13, can include a grace period of up to two and a half months. The $680 carryover provision that applies to health FSAs does not apply to dependent care accounts. If your employer doesn’t offer a grace period for the dependent care FSA, all unspent funds forfeit at year-end with no partial rollover available.
The Run-Out Period Is Not Extra Spending Time
After the plan year ends, most FSA plans include a run-out period for submitting reimbursement claims. This trips people up because it sounds like more time to spend, but it isn’t. The run-out period only lets you file paperwork for expenses you already incurred during the plan year. You cannot use it to pay for new appointments or prescriptions.
The length of the run-out period depends on your employer’s plan document, though 90 days is the most common window. To qualify for reimbursement, a medical expense must have been incurred before the plan year closed. Incurred means the date you received the service, not the date you got the bill or paid the provider. If your documentation isn’t submitted by the run-out deadline, the claim is denied even if money remains in your account.
When you submit a claim, the plan administrator needs three pieces of information from a source independent of you: a description of the service or product, the date it was provided, and the amount charged. An explanation of benefits from your insurance company satisfies this requirement if it shows the date of care and your share of the cost after the insurer’s payment. You also need to certify that the expense hasn’t been reimbursed by any other coverage.
HSA Funds Roll Over Permanently
Health Savings Accounts work on a completely different ownership model. Under Internal Revenue Code Section 223, the account holder has a nonforfeitable interest in the balance from the moment funds are deposited.1Office of the Law Revision Counsel. 26 U.S. Code 223 – Health Savings Accounts There is no annual deadline, no carryover cap, and no use-it-or-lose-it pressure. The money is yours the way a bank account is yours.
This permanence creates options an FSA can’t match. You can accumulate an HSA balance over decades, letting it grow while paying smaller medical bills out of pocket. If you stop being enrolled in a high-deductible health plan, you lose the ability to make new contributions, but every dollar already in the account remains available for qualified medical expenses whenever you need them. After you enroll in Medicare and can no longer contribute, the existing balance still stays intact and can be spent tax-free on eligible costs for the rest of your life.
Because the HSA is held by a financial custodian you chose rather than by your employer, you can move the balance to a different custodian at any time through a direct trustee-to-trustee transfer, which has no frequency limit. You can also take a distribution and redeposit the funds into another HSA within 60 days, but this rollover method is limited to once every 12 months.
What Happens to Each Account When You Change Jobs
An HSA follows you with no action required. The account is in your name, held by your custodian, and your employer leaving the picture changes nothing. You keep the balance, the investment elections, and full withdrawal rights.
FSAs are a different story. When you leave a job, your health FSA typically terminates on your last day of employment or at the end of the month, depending on the plan. Any remaining balance is forfeited unless you elect COBRA continuation coverage. COBRA lets you keep the FSA active through the end of the current plan year, but only if the account is underspent, meaning the remaining balance exceeds what you’d pay in COBRA premiums for the rest of the year. Even with COBRA, the FSA coverage cannot extend beyond the current plan year.
This is where people lose real money. If you’re planning to leave a job mid-year, front-load your FSA spending early. Schedule medical appointments, fill prescriptions, and buy eligible supplies before your last day. Once you’re out, the window to use those funds is narrow or nonexistent.
What Happens to an HSA When the Account Holder Dies
HSA portability extends beyond the account holder’s lifetime, but the tax treatment depends on who inherits the account. If your designated beneficiary is your spouse, the HSA simply becomes theirs. They can continue using it tax-free for qualified medical expenses, contribute to it if they’re otherwise eligible, and keep the same tax advantages you had.
If the beneficiary is anyone other than a spouse, the account closes and the entire balance is treated as taxable income to the beneficiary in the year of death. The beneficiary can reduce the taxable amount by paying the deceased’s outstanding medical expenses within one year, but any remaining balance after that is fully taxable. Naming your spouse as the primary HSA beneficiary avoids that income hit entirely.