Key Takeaways
- Money left in a health FSA after the plan’s deadlines goes back to your employer, and the employer is not allowed to pay it back to you personally.
- A plan can soften the loss with a carryover of up to $680 or a grace period to March 15, never both, and plenty of plans offer neither.
- The run out period is for sending in receipts only.
Leftover money in a health FSA does not go to the IRS, which is what a lot of people picture when they hear use it or lose it. It goes back to the employer that runs the plan. The employer can put it toward the cost of running the FSA or share it out among everyone enrolled, but any refund has to go to every participant on the same basis, so it can never be tied to what one person left behind. Whatever is sitting in your account after the last deadline has passed is gone for you, and how much that turns out to be depends on which deadline your plan uses.
I went through the 2026 figures before writing this. The health FSA limit went up to $3,400 for plan years starting in 2026, Revenue Procedure 2025-32 set the carryover ceiling at $680, and that $680 is 20% of the $3,400, which is how the carryover gets worked out every year now.
The 3 Deadlines On An FSA Year
A health FSA can have up to 3 dates at the end of the year and most people only know about 1 of them. The first 2 are alternatives, since the IRS notice that created the carryover lets an employer pick one or the other or neither, whereas the third sits on top of whichever one the employer picked.
Carryover Of Up To $680
With a carryover, up to $680 of what is left on a 2026 plan rolls into 2027 and can be spent on anything eligible during that next year. Employers can set a lower cap than $680 and some do, so the figure in your own plan documents counts for more than the IRS number. If you have $900 left and a $680 carryover, the $220 over the cap is what you lose, and the $680 is safe.
One side effect catches people who are switching to a high deductible plan for next year. A carried over balance in a general purpose FSA counts as other health coverage, and under IRS Notice 2014-66 it can stop you from putting money into an HSA from January, unless the employer turns it into a limited purpose FSA for dental and vision or lets you turn the carryover down.
Grace Period To March 15
A grace period gives you up to 2.5 months after the plan year ends to keep spending the old year’s money, which on a calendar year plan means March 15. There is no dollar cap on it, so the whole leftover balance stays usable, although the expense itself has to happen inside those weeks and a filling on March 20 would not come out of 2026 money. Dependent care FSAs can have a grace period too, but they are never allowed a carryover.
Run Out Period For The Paperwork
The run out period does not let you spend anything new. It is extra time to send in claims for care you already had before the deadline, and the length is set by the employer, often around 90 days. So an eye exam from December 12 can still be claimed in February, while a pair of glasses bought in February cannot come out of last year’s money unless the plan also has a grace period. HealthCare.gov’s page on FSAs tells people to check with the employer for exactly these dates, and that is the right advice, because no 2 plans are set up the same way.
You Can Spend The Whole Year’s Amount In January
The full amount you elected for the year has to be available from the first day of the plan year, even though the payroll deductions are coming in slowly across 24 or 26 paychecks. IRS Publication 969 states it directly, the maximum reimbursement must be available at all times during the coverage period, and people call it the uniform coverage rule. Somebody who elected $3,400 could have $3,400 of dental work done in the second week of January and get reimbursed in full, having paid in something like $130 so far.
That turns the December problem around, because the surest way to avoid forfeiting money at the end of the year is to have spent most of it long before the end of the year. Costs you already know about, a crown, new glasses, a course of physical therapy, can go in the first months, and the smaller things that turn up later can take whatever remains.
Leaving Your Job With Money Still In The FSA
The same rule works in your favor if you leave early. A person who spent the full year’s amount in January and quits in March keeps the reimbursement, and the employer absorbs the difference, which is perfectly legal.
The other way around is the painful one. If you leave with money paid in but not spent, anything you have after your last day is not covered, and the unspent part is forfeited unless the employer offers COBRA for the FSA and you decide to keep paying into it.
What The Balance Can Still Pay For Before It Goes
Most of the easy spending is care you would have needed anyway, and this is where a leftover balance tends to go in the last weeks of a plan year:
- An eye exam, prescription glasses, or a year of contact lenses.
- Dental cleanings and fillings.
- Copays and deductibles for doctor visits.
- Physical therapy, and podiatrist visits including prescribed orthotics.
- Prescription medicine.
- Over the counter medicine and period products, which have been eligible without a prescription since the CARES Act changed the rules.
Shoes and other things that are only medical some of the time need a Letter of Medical Necessity, and that is better sorted out in October than in the last week of December. For the everyday items, buying from the drugstore down the road or an online pharmacy both work, as long as the receipt shows what was bought, since a card slip with no item detail on it is one of the most common reasons a claim gets sent back.
Log in to the FSA account this week and look for the end date of the plan year, whether the plan has a grace period or a carryover and how much, and the last day for claims. On a calendar year plan with no grace period, anything booked after December 31 is too late for 2026 money, so the appointments need to be on the calendar by the first week of December.
