FSA Carryover

An FSA carryover is the amount of unused money in a health flexible spending account that an employer may let you roll into the next plan year instead of forfeiting it. For plan years starting in 2025, the maximum carryover is $660. The rest of the "use it or lose it" rule still applies: anything above the carryover that is unspent at year-end goes back to the employer. Whether your plan offers a carryover at all is the employer's choice, and a plan may offer a carryover or a grace period, but not both.

The FSA is one of the few benefits where the fine print decides whether you keep your own money. Employees forfeit an estimated $3 billion to $4 billion a year in unused FSA balances, an average of a few hundred dollars each. The carryover was created in 2013 to soften that, and the limit has risen with inflation from $500. There is a wrinkle with HSAs: if you carry FSA money into a year when you switch to a high-deductible plan, the carried-over general-purpose FSA makes you ineligible to contribute to an HSA for that year unless the employer converts it to a limited-purpose FSA for dental and vision only. I have watched people lose a year of HSA contributions over a $200 carryover nobody mentioned.

The takeaway: in December, check your FSA balance against your plan's carryover amount, and spend down anything above it on glasses, dental work, or a stock-up of eligible over-the-counter items. If you are moving to an HDHP next year, ask HR to make the carryover limited-purpose.