Do Flexible Spending Accounts Rollover and Carry Over Funds

Flexible spending accounts, or FSA, can be a great way to save money on healthcare expenses, but one common question is whether they rollover or carry over funds from year to year.

Some FSAs do have a rollover option, but it's not a standard feature. According to the IRS, only FSAs tied to a cafeteria plan, which allows employees to choose between cash and benefits, can rollover up to $550.

In contrast, FSAs not tied to a cafeteria plan typically do not rollover funds. This means if you have a standalone FSA, any unused funds will expire at the end of the plan year.

A Flexible Spending Account, or FSA, is a type of savings plan that allows you to set aside a portion of your income on a tax-free basis for qualified expenses.

FSAs are designed to help you save for expenses that are not covered by insurance, such as medical or child care costs.

For another approach, see: Accounts for All Revenues and Expenses over an Accounting Period

Flexible spending accounts, or FSAs, come in three main types: General Purpose or Healthcare FSA, Dependent Care FSA, and Limited-Purpose FSA.

A General Purpose or Healthcare FSA allows you to use funds for eligible medical expenses, including dental and vision, for you, your spouse, and dependents. You can also get a rollover or a grace period with this type of FSA.

A Dependent Care FSA is for individuals who need dependent care so they can work, and you can use money from this account to pay for dependent care of a child or adult.

Limited-Purpose FSAs only include qualifying dental and vision expenses, and can come with a rollover or a grace period.

Here are the three types of FSAs in a list:

It's worth noting that FSAs are not like Health Savings Accounts (HSAs) - they work with any health insurance plan and you don't have to have a qualified high-deductible health plan to use them.

On a similar theme: Do Health Savings Accounts Rollover

The IRS sets the rollover limit for FSAs each year, which means you can carry over up to $640 in 2024 and $660 in 2025 of your unused funds to the following plan year.

You can roll over your FSA balance if you have less than the carryover amount remaining in your account, and you can still contribute the maximum amount in the following year.

If you have a $700 balance at the end of 2024, you can start the year off with $640 plus that year's FSA contribution limit, but you're only allowed to take up to the rollover limit into the next year.

Rollovers can only be processed for the prior year after the Claims Submission Deadline has passed, which is typically between April 15 and May 1 for employers with a calendar year plan year.

You can carry over the remaining amount of your FSA balance if you elected to contribute more than you spent, such as if you contributed $3,000 but only spent $2,700.

Here's an interesting read: Flex Spending Account Balance

The rollover amount does not require an election or any payroll deduction and will be deposited into your FSA before May 30.

If your balance at the end of the Claims Submission Deadline is $50 or more, those funds will roll over to the new plan year, regardless of whether you made a health FSA election in the following year.

If you have a balance of less than $50 at the end of the Claims Submission Deadline, it will only roll over if you made a health FSA election in the following plan year, and any balance less than $50 will be forfeited.

With the grace period option, employees can get an extra 2.5 months to use the previous year's FSA funds, but the amount of time you have to use your FSA funds is much shorter than with the rollover alternative.

The rollover feature is only available on some Health FSA accounts, so be sure to check your Plan Fact Sheet to confirm if your Health FSA plan allows for a rollover.

Take a look at this: Can Someone Check My Bank Account Balance with Account Number

The biggest benefit to an FSA rollover is that you'll have the entire upcoming plan year to use the funds from the previous year. This setup is helpful if you don't have any medical services or procedures scheduled at the beginning of the following year.

You can only roll over up to the maximum carryover amount, which means you'll still be leaving some money on the table if you have more than that in unused funds.

If you've contributed a certain amount to your FSA but only spent a portion of it, you can carry over the remaining funds to use in the next plan year. For example, if you elected to contribute $3,000 this year but only spent $2,700, you could carry over the remaining $300.

However, if you only spent $2,000, you could only carry over the maximum allowed by the IRS, and you would still forfeit any unspent funds over the IRS rollover limit.

Take a look at this: Flex Spending Account Use It or Lose It

The FSA rollover process can be a bit confusing, but don't worry, I've got the details.

You can carry over up to $640 in 2024 and $660 in 2025 of your unused FSA funds to the following plan year.

If you have a balance at the end of the year, you can roll it over to the next year, but the amount you can carry over is limited by the IRS.

For example, if you have a $700 balance at the end of 2024, you can start the year off with $640 plus that year's FSA contribution limit.

You can still contribute the maximum amount in the following year, even if you roll over some funds.

If you only spent $2,000, you could only carry over the maximum allowed by the IRS, which means you'd forfeit any unspent funds over the rollover limit.

Up to $660 of your remaining 2025 account balance will automatically roll over to your 2026 Health Care FSA with WEX.

Suggestion: Irs Flex Spending Account

The rollover amount does not require an election or any payroll deduction and will be deposited into your FSA before May 30.

You can carry over the full FSA balance if you have less than the carryover amount remaining in your account.

Claims will first be paid from the current plan year's balance and then deducted from any carryover amounts.

Any remaining funds over $660 in your Health Care FSA will be forfeited.

The FSA rollover limit is set by the IRS and varies by year, with a limit of $640 in 2024 and $660 in 2025.

You can carry over unused FSA funds to the following plan year, but you're only allowed to take up to the rollover limit into the next year.

For example, if you have a $700 balance at the end of 2024, you can start the year off with $640 plus that year's FSA contribution limit in 2025.

If you have less than the carryover amount remaining in your account, you can roll over the full FSA balance.

The rollover amount does not require an election or any payroll deduction and will be deposited into your FSA before May 30.

Any remaining funds over the rollover limit will be forfeited, so it's essential to keep track of your FSA balance and plan accordingly.

You can still contribute the maximum amount in the following year, even if you carry over unused funds from the previous year.

For instance, if you elected to contribute $3,000 this year, but only spent $2,700, you could carry over the remaining $300 to use next year.

You might enjoy: Can You Contribute to a Rollover Ira Account

If you have FSA expenses that haven't been validated with receipts, your card won't be activated for the next year.

Unsubstantiated purchases can lead to some serious consequences. If you still have these purchases at the end of the plan year run-out period (April 30, 2026), the dollar amount will be added to your wages for the previous year and taxed as ordinary income.

You'll want to make sure you're on top of your FSA expenses to avoid any unexpected tax surprises.

See what others are reading: What Can I Purchase with Flex Spending Account