When you leave a job, your flexible spending account coverage ends on your last day of employment, and whatever balance you haven’t spent is at immediate risk. FSA termination rules give you a short window to submit claims for expenses you already incurred, and after that window closes the money is gone. A health FSA may be eligible for COBRA continuation if your remaining balance exceeds the premiums; a dependent care FSA works differently and generally offers no continuation at all.
When Your Coverage Ends
Your ability to use your FSA for new medical expenses stops on your last day of employment. Your employer’s Section 125 cafeteria plan document controls the exact timing, but the default is simple: services received after your termination date are not reimbursable.1Office of the Law Revision Counsel. 26 USC 125 – Cafeteria Plans
One quirk of health FSAs matters a great deal here. Your full annual election is available from day one of the plan year, regardless of how much you have actually contributed through payroll.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans If you elected $3,400 for the year and leave after contributing only $1,200, you could already have spent the full $3,400 on eligible expenses. Your employer absorbs the difference and cannot recoup it. The flip side is that if you have barely touched your FSA, there is more money sitting on the table when you walk out.
The Run-Out Period for Submitting Claims
Once your coverage ends, you enter a run-out period: a set window to submit reimbursement requests for eligible expenses you incurred before your termination date. It is commonly 60 or 90 days, but your plan document sets the exact length. Call your benefits administrator as soon as you give notice and get the deadline in writing, because it is firm.
Any funds remaining after the run-out period closes are forfeited. There is no appeal, no extension, and no way to recover the money. That is the “use it or lose it” rule, and it is the single biggest financial risk when you leave with an FSA balance.
To be reimbursed you need documentation showing the date of service, what the expense was for, and how much it cost. Eligible expenses follow the categories in IRS Publication 502, which covers doctor visits, prescriptions, and qualifying over-the-counter items like pain relievers, first-aid supplies, and allergy medication.3Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses The expense must have been incurred before your coverage ended. A receipt dated after your termination will not qualify, no matter how quickly you file.
Front-loading can work strongly in your favor during the run-out period. If you elected $3,400 but only contributed $1,500 before leaving, you are still eligible for reimbursement up to the full $3,400 for expenses incurred while you were covered.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans Most people leaving mid-year are on the losing side of this equation, with contributed money sitting unused. That is where COBRA comes in.
COBRA Continuation for a Health FSA
COBRA lets you keep incurring new health FSA expenses after termination, which is fundamentally different from the run-out period. The run-out period only lets you file claims for expenses already incurred; COBRA lets you keep spending from the account on new medical expenses through the rest of the plan year.
Your former employer is not always required to offer COBRA for the health FSA. The general rule is that COBRA must be offered only when the remaining benefit exceeds the total COBRA premiums you would owe for the rest of the plan year. In practice, that means COBRA is offered when you have more left in your FSA than you have used. If you have already spent more than you contributed, COBRA typically will not be offered because there is no remaining benefit worth continuing.
Election and Cost
You have 60 days from the date you receive the COBRA election notice to decide.4U.S. Department of Labor. Health Benefits Advisor for Employers – Consolidated Omnibus Budget Reconciliation Act (COBRA) The premium can be up to 102% of the applicable premium, calculated as the full annual election divided by 12 plus a 2% administrative surcharge.5Office of the Law Revision Counsel. 26 USC 4980B – Failure to Satisfy Continuation Coverage Requirements of Group Health Plans On a $3,400 election, that works out to roughly $289 a month.
When It’s Worth the Premiums
COBRA for a health FSA only lasts until the end of the current plan year, not the 18 months you would get for regular health insurance. Add up the monthly premiums from your termination date through the plan year end and compare that total to your remaining balance. If the balance clearly exceeds the premiums and you can realistically incur enough qualifying expenses before year end, COBRA is worth electing.
Someone leaving in October with a December 31 plan year end and $1,500 left in their FSA would pay about $867 in premiums (three months at $289) for access to $1,500 in tax-free medical spending. That is a net benefit of around $633 if the full balance gets used. Someone leaving in February with 10 months of premiums ahead would pay roughly $2,890 for the same $1,500. A losing proposition.
Grace Periods and Carryovers After You Leave
Two plan features can soften the “use it or lose it” rule for active employees, but neither works the way most terminated employees hope.
A grace period, where offered, gives participants an extra two and a half months after the plan year ends to incur new expenses using prior-year funds.6SHRM. Annual FSA Grace Period Ends March 15 This is tied to the plan year end, not your termination date. If you leave in July, a grace period starting the following January does nothing for you unless you have elected COBRA and are still a participant when the plan year closes.
A carryover provision, which plans may offer instead of a grace period (not both), lets you roll a portion of unused funds into the next plan year. For the 2026 plan year, the maximum carryover is $680.7FSAFEDS. New 2026 Maximum Limit Updates Amounts above the limit are still forfeited.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans The carryover applies at plan year end and does not transfer your balance to a new employer when you change jobs. If you elect COBRA through the end of the plan year, the carryover may apply to your continued coverage; if you do not elect COBRA, the balance runs through the forfeiture process once the run-out period closes.
Dependent Care FSAs Follow Different Rules
A dependent care FSA is not a group health plan, so COBRA continuation does not apply.8U.S. Department of Labor. COBRA Continuation Coverage Once your employment ends, there is no standard mechanism to keep incurring new dependent care expenses against the account.
Dependent care FSAs also are not front-loaded. You can only be reimbursed up to what you have actually contributed through payroll.9FSAFEDS. Dependent Care FSA – How It Works If you elected $5,000 and contributed $2,000 before leaving, $2,000 is the ceiling on your reimbursement even if you incurred $4,000 in eligible costs while employed. The rest of your election simply disappears.
Some employers add an optional spend-down provision to their plan documents that lets you continue incurring dependent care expenses through the end of the plan year after you leave, reimbursable up to what you contributed. It is not required. Check your summary plan description or call your benefits administrator to confirm whether your plan includes it.
Spending Down Before Your Last Day
If you know your departure date in advance, spend down your health FSA balance before you leave. Because the full annual election is available immediately, you may have access to more than you have contributed, and everything you spend before termination is money you cannot lose.
FSA-eligible options that draw down a balance quickly include over-the-counter pain relievers, antacids, antibiotic ointments, first-aid kits, allergy medication, and sunscreen.10FSAFEDS. Eligible Health Care FSA (HC FSA) Expenses Prescription eyeglasses and contact lenses are also eligible and absorb larger amounts in a single purchase. Dental cleanings, eye exams, and other routine appointments you have been putting off are worth scheduling before your coverage ends.
Keep every receipt with the date of service clearly shown. Reimbursement requests submitted without proper documentation during the run-out period will be denied, and by that point you may not have time to get a corrected receipt before the deadline.
Starting an FSA at a New Job
You cannot transfer or roll over an FSA balance from a former employer to a new employer’s plan. FSAs are tied to a specific employer’s cafeteria plan, with no portability mechanism like the one that exists for a 401(k) or HSA.
There is a useful quirk, though: the annual health FSA contribution limit applies per employer, not per person. For 2026 the limit is $3,400.7FSAFEDS. New 2026 Maximum Limit Updates If you contributed $2,000 to your previous employer’s FSA and then start a new job, you can elect up to the full $3,400 at the new employer’s plan, even though your combined calendar-year contributions would exceed a single-plan cap. The IRS treats this as a plan-year maximum rather than an individual annual limit.
If your new employer offers an FSA, you typically need to enroll during their benefits window or within 30 days of hire. Enrollment is not automatic; you have to actively elect the FSA and choose your contribution amount. The new account starts at zero, so plan your election based on the medical expenses you actually expect for the rest of that plan year.