Use It or Lose It: The FSA Forfeiture Rules
What actually happens to money you didn't spend — and the four-week playbook for making sure it isn't you.
Unspent FSA money does not roll over by default: it is forfeited to your employer. Your only protections are the March 15 grace period, the $680 carryover, or spending it in time — your plan offers exactly one of the first two, and only some plans offer any.
Where forfeited money actually goes
Forfeitures return to the employer, who by law must use them for plan administration costs, to offset employee elections the following year, or to fund a claims reserve — not as profit on your specific account. That's cold comfort if it's your $300. The average forfeiture per employee runs in the low hundreds of dollars every year, almost entirely because people lose track of the deadline — not because they couldn't find eligible spending.
The three safety valves, ranked
| Protection | Value | Availability |
|---|
| Carryover | Up to $680 into next year | One or the other — employer's choice |
| Grace period | 2.5 extra months to incur expenses | One or the other — employer's choice |
| Spending it down | Unlimited | Always available — this site exists for this |
The four-week spend-down playbook
- Week 1 — know your numbers. Balance, deadline type (12/31 vs 3/15 vs carryover), and claims submission cutoff.
- Week 2 — replace what you'd buy anyway. Glasses/contacts, sunscreen, OTC medicines, first-aid restock, electric toothbrush heads? (No — heads are hygiene. The yes/no list keeps you honest.) Use FSA-eligible checkout at drugstores and big-box stores where available.
- Week 3 — schedule the deferred appointment. Dental cleaning, eye exam, dermatologist mole check, physical-therapy session. Purchase date, not service date, usually controls — but book the service before year-end to be safe.
- Week 4 — reimburse the past. Submit receipts for out-of-pocket expenses you already paid this plan year. Most portals accept uploads from your phone. Then set a calendar reminder for the run-out deadline.
The December trap: eligible-item stockpiles are fine (there's no rule against buying next year's allergy medicine in December), but future services generally don't count — paying in December for a March surgery typically doesn't make it a this-year expense. The expense must be incurred within the plan year.
More on this site
The dates behind this page.
Make HSA cash earn 2-3%+.
Sources:
IRS Pub 969 (use-or-lose, grace period, carryover). Plan documents control; forfeiture handling varies by employer. Not tax advice.