What Happens to Your FSA When You Change Jobs?

When you change jobs, your health FSA balance is generally frozen on your last day of work and any money you haven’t spent is forfeited to your employer, unless you elect COBRA continuation coverage or you happen to have spent more than you contributed. Dependent care FSAs follow different rules, and a few plan features can preserve or destroy access in ways that catch people off guard. The 2026 maximum health FSA contribution is $3,400, and every dollar you leave behind on your last day is at risk.¹

Your Health FSA Balance Ends the Day You Leave

Most employer plans end your health FSA coverage at midnight on your last day of work. Any medical expense incurred after that date is ineligible for reimbursement, no matter how much money sits in the account. Leave on a Friday with $1,800 remaining, and a doctor visit the following Monday comes entirely out of your own pocket. The plan treats those leftover dollars as forfeited.²

This forfeiture isn’t a quirk. It flows from how cafeteria plans work under Internal Revenue Code Section 125: your FSA is part of your employer’s benefits package, and when the employment relationship ends, so does your participation in that package.³ Forfeited money returns to the employer’s plan to offset losses on other participants. If you know your departure date in advance, schedule dental work, fill prescriptions, buy new glasses, or stock up on eligible over-the-counter items before you leave.

You Still Have a Window to File Claims for Old Expenses

Leaving kills your ability to incur new FSA-eligible expenses, but you still get a window to submit claims for expenses that happened while you were employed. This is the run-out period, and most plans set it between 30 and 90 days after your termination date. The exact length depends on your employer’s plan document.

A dental cleaning on your second-to-last day is still reimbursable if you file the receipt during the run-out period. The requirement is that the date of service falls within your active coverage period. Claims for expenses incurred after your last day will be denied even if you file during the run-out window. If your employer uses a third-party administrator, your online account usually stays accessible during that window even though you can no longer swipe the FSA debit card.

Carryover and Grace Periods Usually Don’t Save You

Not every unspent dollar is automatically lost when the plan year ends normally. Some plans include a carryover provision that lets you roll unused health FSA funds into the next plan year. For 2026, the maximum carryover is $680.¹ Other plans offer a grace period of up to two and a half months after the plan year ends, during which you can still incur expenses against the prior year’s balance.

Here’s the catch. These provisions are designed for employees who stay through the end of the plan year. When you terminate mid-year, most plans end your coverage immediately, and the carryover or grace period never kicks in. IRS guidance is clear that unused FSA amounts at termination are forfeited unless you elect COBRA.² Leave in August, and you don’t get to carry $680 into next year. You’d need to either spend it before your last day or elect COBRA to preserve access. A small number of plans do extend the grace period to terminated employees, but this is the exception. Check your Summary Plan Description for the specific language governing your situation.

COBRA Can Keep Your Health FSA Alive

COBRA offers a way to keep your health FSA active after you leave, but it only makes financial sense in narrow circumstances. Under federal law, employers with 20 or more employees must offer COBRA continuation coverage for group health plans, including health FSAs, when a qualifying event like job loss occurs.⁴

The employer is only required to offer COBRA for an FSA that is “underspent” at the time you leave. An account is underspent when the remaining balance you could claim exceeds the total COBRA premiums you’d pay for the rest of the plan year. If premiums would eat up more than the remaining benefit, COBRA is worthless for the FSA and the employer doesn’t have to offer it.

If you elect COBRA, you pay the full contribution amount yourself with after-tax dollars, plus an administrative fee of up to 2%.⁵ A $280 monthly election becomes $285.60 out of pocket. The upside is that you can keep incurring new eligible expenses and accessing your full annual election through the end of the plan year. COBRA FSA coverage typically runs through the end of the current plan year, not the full 18 months that applies to health insurance COBRA.

When the Math Works

Run the numbers before signing up. Leave in March with $2,500 remaining and a monthly COBRA premium of about $285, and you’d pay roughly $2,565 over nine months to access $2,500. That’s a losing proposition. But leave with $2,500 remaining and only four months left in the plan year, and you’d pay about $1,142 to access $2,500 of tax-free spending. Worth doing if you have medical or dental expenses on the horizon.

The One Scenario That Works in Your Favor

If you’ve already spent more than you’ve contributed, leaving your job actually benefits you. The Uniform Coverage Rule requires your full annual health FSA election to be available for reimbursement from the first day of the plan year, regardless of how much you’ve contributed through payroll so far.⁶

Elect $3,400 for the year, spend the entire amount on LASIK in February, then quit in March having contributed only about $570 through payroll, and the employer absorbs the roughly $2,830 difference. The employer cannot deduct the overspent amount from your final paycheck, send you to collections, or even accept voluntary repayment. Allowing recoupment would destroy the insurance-like risk-shifting that gives health FSAs their tax-favored status.⁶

This rule only applies to health FSAs. Dependent care FSAs work on a pay-as-you-go basis, so you can only be reimbursed up to what you’ve actually contributed.

Dependent Care FSA Rules Are Different

Dependent care accounts follow a completely separate set of rules. They aren’t covered by COBRA at all, since they don’t qualify as group health plans under federal law.⁷ The maximum dependent care FSA contribution for 2026 is $7,500 per household, or $3,750 if you’re married filing separately.¹

The good news: many employer plans include a spend-down provision letting you submit claims for qualifying dependent care expenses incurred through the end of the plan year, even after you’ve left. With $2,000 remaining in your dependent care FSA when you resign in June, you may still be able to submit daycare receipts from July and August. This flexibility reflects that dependent care FSAs cover costs that enable you to work or look for work.

Spend-down isn’t guaranteed. It depends entirely on your employer’s plan document. Some plans cut off dependent care reimbursement at termination, just like health FSAs. Ask HR before your last day. And remember, dependent care reimbursements are limited to what you’ve actually contributed through payroll deductions up to that point.

Starting an FSA at Your New Employer

You cannot transfer or roll over FSA funds from one employer to another. Each employer’s cafeteria plan is independent, and your old balance stays with your old plan. Once those funds are forfeited, they’re gone for good.

There is a useful silver lining to the per-employer structure. The annual health FSA contribution limit applies to each employer’s plan separately, not to you as an individual. Max out your election at $3,400 with your old employer, then start a new job mid-year, and you can elect up to another $3,400 at the new employer’s plan.³ Whether this makes sense depends on how many months remain in the new plan year and how much you expect to spend. Electing the full amount with only a few months of deductions left means large per-paycheck hits.

Most employers impose a waiting period before new hires can enroll in the cafeteria plan, commonly 30 to 90 days. Factor that delay in. If you’ll have a gap between old coverage ending and new FSA access beginning, front-load any predictable medical spending before you leave.

A Leftover FSA Can Block Your New HSA

If you’re moving to an employer that offers a high-deductible health plan with a Health Savings Account, any lingering FSA coverage can disqualify you from contributing to the HSA. You must be free of non-HDHP coverage to make HSA contributions, and an active FSA counts as disqualifying coverage.⁸

The most common way this happens is through a grace period. If your old employer’s plan year ended in December with a grace period running through mid-March, you’re considered covered by the FSA that entire time. Even if your FSA balance is zero, the mere existence of the grace period coverage makes you ineligible for HSA contributions until the first day of the month after the grace period ends.⁹ Terminate mid-year with coverage ending on your last day, and the grace period generally doesn’t apply, so this conflict may not arise. Leave near the end of a plan year, though, and you could lose months of HSA contribution eligibility. One workaround some employers offer is a limited-purpose FSA that covers only dental and vision, which doesn’t conflict with HSA eligibility.

A Practical Timeline for Changing Jobs

Before you give notice: check your health FSA and dependent care FSA balances. Schedule any medical, dental, or vision appointments you’ve been putting off. Stock up on FSA-eligible supplies.
On your last day: confirm with your plan administrator when coverage officially ends and how long the run-out period lasts. Ask whether your plan’s carryover or grace period applies to terminated employees.
Within 14 days of leaving: you should receive a COBRA election notice. Review whether your health FSA is underspent enough to make COBRA worthwhile.
During the run-out period: submit all outstanding claims for expenses incurred while employed. Don’t wait until the deadline. Administrators reject late submissions without exception.
At your new job: if the new employer offers an FSA, decide on your election based on remaining months in the plan year. If it offers an HSA-eligible HDHP instead, confirm that no lingering FSA coverage from your old job will block HSA contributions.

1
FSAFEDS. New 2026 Maximum Limit Updates
2
Internal Revenue Service. Notice 2013-71 – Modification of Use-or-Lose Rule for Health Flexible Spending Arrangements
3
Office of the Law Revision Counsel. 26 USC 125 – Cafeteria Plans
4
U.S. Department of Labor. COBRA Continuation Coverage
5
U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Employers and Advisers
6
Internal Revenue Service. Training – Introduction to Cafeteria Plans – Flexible Spending Arrangements
7
U.S. Department of Labor. An Employees Guide to Health Benefits Under COBRA
8
U.S. Department of the Treasury. Treasury and IRS Issue Guidance on FSA Grace Period and HSA Eligibility
9
Internal Revenue Service. Notice 2005-86 – Health Savings Account Eligibility During a Cafeteria Plan Grace Period