What Happens to Your FSA If You Change Jobs?

If you change jobs, the money left in your Health FSA is forfeited on your last day of coverage unless you act quickly: you can submit claims for expenses incurred before you left during a short run-out window, and in many cases you can elect COBRA to keep the account active through the end of the plan year. Dependent Care FSAs work differently, and a lingering Health FSA can complicate an HSA at your new job.

When Your Health FSA Coverage Ends

Most plan documents end Health FSA participation on your final day of employment. Some employers extend it through the last day of the calendar month you leave. Once that cutoff passes, you can no longer incur new eligible expenses under the account. A prescription filled the day after coverage ends is not reimbursable, even with hundreds of dollars still sitting in the balance.

This is true no matter how much money remains. If your plan normally offers a grace period giving you an extra two and a half months to spend down at year-end, that grace period does not survive termination. Any carryover from the prior plan year is also forfeited when you leave, unless you elect COBRA.¹

Filing Claims for Expenses Before You Left

You cannot incur new expenses after coverage ends, but you typically have a run-out period to submit reimbursement requests for expenses that occurred while you were still covered. Most employers set this window at 60 to 90 days after your termination date. The exact timeframe is in your plan’s Summary Plan Description.

To get reimbursed, you need a written statement from the provider confirming the expense and its amount, plus a statement that the expense was not covered by any other health plan.² Pull together receipts and explanation-of-benefits documents for appointments, prescriptions, or procedures dated before your last day. Miss the run-out deadline and those funds are gone. A $300 physical from the week before you left becomes unreimbursable the moment the window closes.

Keeping Your Health FSA Through COBRA

Federal law lets you keep a Health FSA active after leaving, but only in certain situations. Under 26 U.S.C. § 4980B, an employer’s group health plan, including a Health FSA, must offer continuation coverage when a qualifying event like job loss occurs.³ There’s an important exception. The plan does not have to offer COBRA if your account is “overspent,” meaning you have already been reimbursed for more than the total COBRA premiums you would owe for the rest of the plan year.⁴

If your account is underspent, meaning your remaining balance exceeds the COBRA premiums you would pay, electing COBRA lets you keep incurring and being reimbursed for medical expenses through the end of the plan year. The monthly premium is your total annual election multiplied by 102 percent (a 2 percent administrative fee is allowed) and divided by 12.³

You have at least 60 days from the date you receive a COBRA election notice to decide.³ COBRA coverage for a Health FSA typically ends when the plan year ends, unlike COBRA for major medical, which can last up to 18 months. And the premiums are paid with after-tax dollars, so the payroll-deduction tax advantage disappears.

The Gross Misconduct Exclusion

One situation cuts off COBRA entirely: termination for gross misconduct. Federal law defines the qualifying events that trigger COBRA rights as termination “for any reason other than gross misconduct.”⁵ Neither the statute nor federal regulations define “gross misconduct” precisely, so the determination is made by the employer. If your employer classifies your termination that way, you lose the COBRA option for your Health FSA and for your other group health coverage.

If You Spent More Than You Contributed

Leaving after spending more from your Health FSA than has been deducted from your paychecks works in your favor. Under the uniform coverage rule, your full annual election must be available from the first day of the plan year, no matter how much you have actually contributed.⁶ If you elected $3,400 for the year, spent all of it by February, and resigned in March, the employer absorbs the shortfall.

Your employer cannot demand repayment or claw back the difference from your final paycheck. Employers accept this risk as part of offering the benefit. The other side of the same coin is the use-or-lose rule: leave with money remaining and skip COBRA, and the employer keeps the funds.⁶

Dependent Care FSAs Follow Different Rules

Dependent Care FSAs are not classified as group health plans, so COBRA does not apply to them.⁴ Whether you can continue spending your balance after leaving depends entirely on the employer’s plan document.

Some plans include a spend-down provision letting former employees use their remaining balance for eligible childcare expenses incurred through the end of the plan year. Without that provision, any balance at termination is forfeited. Check your plan document or ask your benefits administrator whether a spend-down option exists before giving notice.

Starting an FSA at Your New Employer

When you enroll in a Health FSA at a new job, you can elect up to the full annual contribution limit ($3,400 for 2026) even if you already contributed to an FSA at your previous employer earlier that year.⁷ The limit applies per employer, provided your old and new employers are unrelated (not part of the same controlled group or affiliated service group).

In practice, someone who maxed out a $3,400 FSA at one company and then joined an unrelated employer could elect another $3,400 at the new job. There is no combined annual cap across unrelated employers. Most mid-year hires still want to size their election to expected expenses for the remainder of the year, because the use-or-lose rule keeps applying. Anything you don’t spend or carry over by the end of the new plan year is forfeited.

How a Former FSA Can Block an HSA at the New Job

If your new employer offers a high-deductible health plan with a health savings account, a lingering Health FSA from your old job can disqualify you from HSA contributions. You generally cannot contribute to an HSA while covered by a general-purpose Health FSA that reimburses medical expenses before you meet a deductible.²

A standard run-out period, which only allows claims for expenses already incurred, does not create an HSA eligibility problem, because you are not “covered” for new expenses. But if you elect COBRA to continue your Health FSA, that active coverage blocks HSA contributions for as long as it is in effect. A grace period on the old plan can create the same conflict if you had a balance at the end of the prior plan year.²

One exception matters: a limited-purpose FSA, which only covers dental and vision expenses. If your former employer’s FSA was limited-purpose, or you can convert a COBRA election to limited-purpose, you can contribute to an HSA at the same time. For 2026, HSA contribution limits are $4,400 for self-only coverage and $8,750 for family coverage.²

1
Internal Revenue Service. Modification of Use-or-Lose Rule for Health Flexible Spending Arrangements
2
Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans
3
Office of the Law Revision Counsel. 26 USC 4980B – Failure to Satisfy Continuation Coverage Requirements of Group Health Plans
4
eCFR. 26 CFR 54.4980B-2 – Plans That Must Comply
5
U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Workers
6
Internal Revenue Service, Treasury. Employee Benefits – Cafeteria Plans REG-142695-05
7
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026