Not Doing This Before The End Of The Year Could Cost You Hundreds Of Dollars

Forgetting to spend the leftover funds in your flexible spending account (FSA) before the end of the end of the year could mean giving up on a substantial amount of money.

Roughly half of FSA holders carried a balance, an average of $441, according to data from the Employee Benefits Research Institute (EBRI). Some of that amount was likely forfeited back to workers’ employers, according to EBRI, as FSAs are ‘use-it-or-lose-it’ accounts.

FSAs allow workers to use pretax dollars to pay for out-of-pocket medical expenses, prescriptions, and more. However, workers must spend down their balance before the end of the plan year or give up the unused funds.

Yet there are some exceptions to this rule. Some employers allow workers to rollover up to $660 into the next year (for 2025) while others offer a grace period allowing workers an extra 2.5 months to use up the money.

According to EBRI, 42% of employers offer a rollover, 33% have traditional use-it-or-lose-it rules, and 26% provide a grace period.

Have Extra FSA Funds? Try Combing Through Recent Expenses

To pay for products and medical expenses with your FSA funds, you may pay for the expense out-of-pocket and then submit a claim (like an itemized receipt) for reimbursement later—this is known as a manually-substantiated claim. Some retailers also offer customers the ability to simply pay for FSA-eligible products with an FSA card via a process known as auto-substantiation.

The EBRI found that those who submitted a manual claim were less likely to forfeit funds than those who only submitted auto-substantiated claims. Workers who made at least one manually substantiated claim gave up $293 versus $407 for those who hadn’t.

“These workers may be combing through their purchases to determine if certain products that they have already purchased, such as sunscreen or antihistamines, are eligible for reimbursement from their FSA,” the EBRI report states.

Since FSA funds can be used to pay for a wide variety of items and services, people may be able to use their FSA money to pay for goods previously purchased during their plan year—as long as they have the proper documentation when they submit a claim.

The EBRI report notes that “as the end of the year quickly approaches, workers at risk of forfeiting funds back to their employers would do well to check to see if any of their previous purchases are FSA-eligible.”