An FSA resets at the end of your employer’s plan year. For most workers that means December 31, but some employers run a different twelve-month cycle, so the reset can fall on another date. Under the federal use-it-or-lose-it rule, anything you haven’t spent by that deadline is forfeited, unless your plan offers a grace period or a carryover to soften the cutoff. Those two options cannot be combined, and neither is guaranteed.
When Your Plan Year Actually Ends
The plan year is a twelve-month period your employer defines in its benefits documents. Many companies align it with the calendar year, January 1 through December 31. Others follow a fiscal year that might start July 1 and end June 30, shifting the reset to mid-summer. On the last day of that cycle, your FSA balance expires for the purpose of paying new medical or dependent care costs.1Internal Revenue Service. IRS: Eligible Employees Can Use Tax-Free Dollars for Medical Expenses
For the 2026 tax year, you can set aside up to $3,400 in pre-tax salary reductions for a health care FSA.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Your full annual election is available from day one of the plan year under the uniform coverage requirement. You can spend the whole amount even if only a few paychecks’ worth of contributions have come out so far.3eCFR. 26 CFR 1.125-3 – Effect of the Family and Medical Leave Act Check your enrollment materials or ask HR to confirm your plan year end date. Every other deadline below depends on it.
Grace Period: Extra Time to Spend
The IRS lets employers add a grace period of up to two and a half months after the plan year ends. During that window, you can keep spending your prior-year balance on eligible expenses like doctor visits, prescriptions, and medical supplies.4Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans For a plan year ending December 31, a full grace period pushes the spending deadline to March 15.1Internal Revenue Service. IRS: Eligible Employees Can Use Tax-Free Dollars for Medical Expenses
The grace period is optional. Your employer decides whether to include it, and not all do. Any funds still unspent when the grace period closes are forfeited permanently.4Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans
Carryover: Rolling Money Into Next Year
As an alternative to the grace period, the IRS lets employers allow you to roll a portion of your unused health FSA balance into the next plan year. This option came from IRS Notice 2013-71, which originally capped the carryover at $500.5Internal Revenue Service. Modification of Use-or-Lose Rule for Health Flexible Spending Arrangements The cap adjusts for inflation. For plan years beginning in 2026, the maximum carryover is $680.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
A few rules shape how the carryover works. Your employer must pick between a grace period and a carryover; the IRS prohibits offering both.5Internal Revenue Service. Modification of Use-or-Lose Rule for Health Flexible Spending Arrangements Carryovers apply to health care FSAs only, not dependent care FSAs.6U.S. Office of Personnel Management. What Happens to Money in FSA Dollars After the Benefit Period A carried-over balance does not reduce your new-year contribution: you could carry $680 into 2026 and still elect the full $3,400. Anything above the carryover limit is forfeited. Whatever does carry over merges with your new plan year balance and has no separate spending deadline.
The Run-Out Period for Filing Claims
The run-out period is separate from the spending deadline, and it catches many people off guard. After the plan year (or grace period) ends, most plans give you an additional window, commonly 60 to 90 days, to submit reimbursement claims for expenses you already incurred while the account was active. You cannot make new purchases during this time. You can only file paperwork for eligible expenses with dates of service inside the plan year.
When you submit a claim, your plan administrator typically wants an itemized receipt or an Explanation of Benefits from your insurance company. The documentation generally needs to show the patient’s name, the provider’s name and address, the date of service, a description of what was provided, and the amount charged. Credit card statements and canceled checks usually don’t qualify because they don’t identify the expense.
Missing the run-out deadline means losing access to those funds even if the expense itself was eligible and happened during the active plan year. Two dates matter: the deadline to incur the expense, and the deadline to file the claim.
Dependent Care FSAs Reset Differently
Dependent care FSAs follow stricter reset rules than health care FSAs. The biggest difference is that dependent care accounts do not allow any carryover. If your employer offers any flexibility, it can only be a grace period of up to two and a half months.6U.S. Office of Personnel Management. What Happens to Money in FSA Dollars After the Benefit Period
For 2026, the dependent care FSA limit is $7,500 per household, or $3,750 if you’re married filing separately.7Office of the Law Revision Counsel. 26 U.S. Code 129 – Dependent Care Assistance Programs A child becomes ineligible for dependent care coverage when they turn 13, and that change counts as a qualifying life event that may let you adjust your election mid-year.
What Happens if You Leave Your Job
Quitting or losing your job usually triggers an immediate FSA reset. Your ability to incur new expenses generally ends on your last day of coverage, often your final day of employment, though some plans extend coverage through the end of the month. After that date, your remaining balance is generally inaccessible.
The uniform coverage rule creates an unusual wrinkle for health care FSAs. Because your full annual election was available from day one, you may have already spent more than you contributed through payroll deductions. If so, your employer cannot require you to repay the difference.3eCFR. 26 CFR 1.125-3 – Effect of the Family and Medical Leave Act If you contributed more than you spent, though, you lose the unspent portion unless you elect COBRA continuation.
COBRA can bridge a health care FSA, but it is only offered when your account has a positive balance, meaning total contributions exceed total reimbursements. If you elect COBRA, you keep contributing on an after-tax basis, and your employer can charge up to 102 percent of the cost (your contribution plus a 2 percent administrative fee). That gets you access to the remaining balance through the end of the plan year. The math only favors you when the unused balance clearly exceeds what you would pay in remaining contributions and fees.
Re-Enrolling for the Next Plan Year
Unlike health insurance, which may auto-renew at many employers, FSA elections generally do not carry over from one year to the next. If you want to participate in the upcoming plan year, you typically must make a new election during open enrollment.8U.S. Office of Personnel Management. What to Consider During Federal Benefits Open Season Forgetting to re-enroll means starting the new year with no FSA, even if you had one the year before.
Some private employers do auto-enroll participants at the prior year’s election amount, so ask HR how your plan handles it. Open enrollment is also the moment to reassess your contribution level. Look at what you spent last year, whether you forfeited anything, and whether upcoming expenses like a planned surgery, orthodontics, or a new baby argue for a higher or lower election.