- Key insight: Discover how FSA deadline nuances significantly affect employee benefit utilization and retention.
- What's at stake: Missed deadlines can mean material forfeitures and reduced perceived value of benefits.
- Supporting data: Average annual FSA forfeiture exceeds $450.
- Source: Bullets generated by AI with editorial review
All flexible spending accounts (FSAs) have a use-it-or-lose-it structure, but deadline details vary. Making sure employees understand theirs will help them
While the typical FSA deadline is December 31 of each year, around 70% of employees are eligible for some type of extension, such as a grace period through March 15, extra time for reimbursements, or partial rollover of funds, according to the FSA Store. Yet millions of account holders will still lose money — over $450 on average — because they aren't aware of
"It's estimated that 50% of FSA users will forfeit funds to a missed deadline," he says. "HR teams need to consistently educate their teams about their plan-year deadline and any extensions they may offer, whether [this is] a partial rollover of unused funds, a grace period or a run-out period."
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Types of extensions, explained
Employers can offer various ways for employees to use their FSA funds after December 31. Knowing which, if any, of these their company provides allows benefit leaders to prep their workforce accordingly. Here are the main things to remember, according to the FSA Store:
Grace period
If employees' FSA plans include a grace period, this means they have 2.5 additional months, or until March 15, to use up their funds.
Runout period
Different from a grace period, this 90-day window is a time for employees to submit claims from the previous year that are eligible for FSA reimbursement.
Partial carryover of funds
This means employees can roll over up to $660 of the money in their FSA from 2025. This amount will increase to $680 for 2026. It's important to note that employers cannot offer a grace period and carry over at the same time.
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Important things to remember
Leave time for needed documentation
Another important reminder for employees is that some of their FSA-eligible items or services require specific documentation from a health provider, such as a letter of medical necessity (LMN). Employees can quickly find out if they need one by checking the
These funds work for dependents, too
Employees should also be reminded to check the eligibility list for ways to spend down their funds, and that now is a great time to stock up on essentials for themselves and their dependents.
For the remainder of the year, benefit leaders can take advantage of this free, customizable
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With consistent communication about FSA benefit guidelines, along with all the ways to use these funds, benefit leaders can help employees make the most of this valuable offering. Giordano encourages the use of all methods available, including newsletters, emails, texts, company intranet sites, in-office or job site posters and mailers, as well as mentions in meetings.
"FSAs can be a reliable and effective financial tool," he says. "[They] bridge the gap between what traditional health plan benefits cover and what an employee and their dependents might need … [helping] individuals and families stretch their budget and protect their [well-being]."
