Your FSA Has Two Possible Deadlines, and You Only Get One

A health Flexible Spending Account is the only money most Americans own that can expire. Not lose value, not get taxed — simply cease to exist, on a date, and go back to the employer.

The rule that does it has a name people repeat without checking which version applies to them. And there are two versions, they are mutually exclusive, and your employer picked one years ago without telling you which.

What does use-it-or-lose-it actually mean?

That unspent money at the end of the plan year is gone. The IRS describes the baseline plainly: participating employees "normally must incur eligible expenses by the end of the plan year or forfeit any unspent amounts."

Two words in that sentence do more work than they look like they do.

Incur, not pay. The expense has to happen inside the plan year. Ordering something in December and being billed in January is generally the wrong way round; having the appointment in December and settling the bill later is the right one. This is also why there is usually a separate, later claims deadline — a run-out period for submitting paperwork for expenses already incurred. Those are two different dates and people routinely conflate them.

Plan year, not calendar year. Plenty of employers run a plan year ending in June, or September, or on some anniversary that has nothing to do with January. If you have assumed 31 December because that is when most things end, that assumption is worth five minutes of checking.

What are the two relief options?

Your employer may have adopted one of these, and here is the part that matters: not both.

A carryover. Some unused money rolls into the next plan year. The amount is capped, and the cap is adjusted annually — for 2025, IRS Publication 969 states that "if the cafeteria plan permits the carryover of unused amounts, the maximum carryover amount is $660." Anything above the cap still forfeits.

A grace period. Instead of rolling money forward, you get extra time to spend it: "an employee has until two and a half months after the end of the plan year to incur eligible expenses." For a calendar-year plan that is mid-March.

And the exclusivity is explicit in the IRS's own words: "Employers can offer either option (not both) or no option."

So there are three possible worlds you might be living in — carryover, grace period, or neither — and they imply completely different deadlines. Under a grace period you have until March to spend. Under a carryover you do not; you have until 31 December, with a small amount surviving. Under neither, 31 December is absolute.

Assuming you have the grace period when your employer chose the carryover is the single most expensive misunderstanding available here, and it is an easy one to make, because both get loosely described as "you get some extra time."

How much money is actually at stake?

Up to the annual salary-reduction limit, which is also indexed. Publication 969 gives the 2025 figure as a $3,300 limit on employee contributions to a health FSA.

That is the ceiling rather than the typical balance, and most people do not leave anywhere near it unspent. But the shape of the risk is worth noticing: this is pre-tax money you already earned and already committed. Forfeiting it is not a missed opportunity, it is a pay cut applied retroactively for the sin of not booking a dentist appointment.

The amounts and limits change from year to year, so treat the figures above as 2025's and check the current year's numbers — or better, your own plan documents, which are the only thing that tells you which relief option you have.

Which reminders are worth setting?

Four, and the first one is the one nobody sets:

• Two weeks after your plan year begins. A one-off reminder to find out three things and write them down: your plan year end date, whether you have a carryover or a grace period or neither, and your claims submission deadline. Ten minutes in month one prevents the entire problem. Nobody does this, which is why the other three reminders exist.
• Ninety days before the plan year ends. Enough runway to book an actual appointment. Eye exams, dental work, physical therapy and specialist slots are not available on demand in the last fortnight of December, which is precisely when everyone else with an FSA is calling.
• Thirty days before. The last realistic point to book something, and the moment to check the balance rather than guess it.
• Two weeks before your claims deadline — the separate, later one. Expenses you already incurred still need submitting, and this is where money is lost by people who did everything else right.

In ReminderIt you can set these by message — "remind me every year on 1 October to check my FSA balance" — and it reads the schedule back before saving. Annual recurring reminders suit the first three; the claims deadline is better as a one-off, because run-out periods vary and a recurring rule will drift.

If you also have a dependent care FSA, it has its own rules and its own balance. Check it separately rather than assuming one reminder covers both.

What this page is not

Tax advice, and not a list of what counts as an eligible expense. Eligibility is genuinely fiddly, it changes, and getting it wrong means a denied claim at the worst possible moment.

Your plan's Summary Plan Description is the authoritative document for your specific situation — which option your employer chose, when your year ends, when claims close. Your benefits administrator can answer all three in one email, and that email is more useful than any article.

What this page is for is narrower: the money expires, there are two possible versions of the escape hatch and you only get one of them, and none of it is on a calendar unless you put it there.

Sources: IRS newsroom, Eligible employees can use tax-free dollars for medical expenses — the forfeiture rule, the two-and-a-half-month grace period, and that employers can offer "either option (not both) or no option." IRS Publication 969 — the 2025 $660 maximum carryover and the 2025 $3,300 salary-reduction limit. Both limits are adjusted annually.