The Lively Blog



Stay up to date on the latest news delivered straight to your inbox

Does My Flexible Spending Account (FSA) Rollover?

Lauren Hargrave · June 23, 2020 · 5 min read


Deciding how much to contribute to your Flexible Spending Account (FSA) at the beginning of your plan year can feel like it’s half fortune telling and half science. The good news is that two policies: the FSA Rollover and the FSA Grace Period can help alleviate the stress of choosing the exact correct amount to contribute to your FSA each year.

FSA basics

FSAs are savings accounts into which you can deposit pre-tax money in order to pay for qualified medical expenses. They must be employer-sponsored (meaning they aren't available in the private market), but unlike HSAs, they aren’t tied to a specific type of health insurance plan.

You must choose the annual amount you want to contribute during your open enrollment period and your employer will then deduct the appropriate amount from each paycheck. If you want to change your elected contribution levels outside of open enrollment, you can typically do so only if you’ve experienced a qualifying life event like getting married or having a child.

There are three types of FSAs:

  • Healthcare FSAs

  • Dependent Care FSAs

  • Limited Purpose FSAs.

Healthcare FSAs

Contributions to Healthcare FSAs are intended to help participants pay for out-of-pocket medical expenses (i.e. qualified medical expenses) that include, but are not limited to: deductibles, copays, prescriptions, over-the-counter drugs for which you have a prescription (insulin refills don't need a prescription), out-of-pocket dental and vision care, crutches, blood sugar test kits and bandages. You can’t use your contributions to pay for health insurance premiums, over-the-counter drugs without a prescription, long-term care or any expense covered under your health insurance plan.

Dependent Care FSA

Dependent Care FSAs were created to help working parents and caregivers pay for child or adult daycare of dependents who live with them the majority of the time. The care for which contributions pay must be essential to allowing the parent(s) and caregivers to work or look for work (so no date nights). The list of allowable expenses includes: nannies, babysitters, daycare, preschool, summer day camp, and before and after school care for children under the age of 13; and adult daycare for a spouse, parent, or other relative who is physically or mentally disabled.

Limited Purpose FSAs

Limited Purpose FSAs can only be used to pay for out-of-pocket dental and vision expenses.

FSA Contribution Limits, Expirations and Rollovers

The FSA contribution limits, which are set by the IRS each year, for the three types of FSAs are as follows:

  • Healthcare FSA: $3,050 in 2023 and $3,200 in 2024. You can use this money to pay for medical expenses for you, your spouse and any dependents which you claim on your tax return. If both you and your spouse have an FSA, you can each contribute up to the maximum contribution limit.

  • Dependent Care FSA: $5,000 for a married couple filing jointly, or $2,500 for each individual FSA if you each have a separate account.

  • Limited Purpose FSA: $3,050 in 2023 and $3,200 in 2024. You can use this money to pay for you, your spouse and your dependents.

Until 2012, there were no such things as FSA rollovers or grace periods. If you didn’t spend your total contributed amount by the end of your plan year, you forfeited any remaining funds back to your employer. But this led to wasteful spending at the end of each plan year as participants raced to find something on which they could use their leftover savings. But then the IRS and Treasury Department made a rule change that truly benefited people contributing to these types of accounts.

Now, employers have the option to EITHER allow employees to rollover up to $610 in 2023 and $640 in 2024 OR they can give employees a 2 ½ month grace period following the end of the plan year during which employees can use any remaining funds. Here are a couple of examples of how this works:

Example 1: The FSA Rollover

Let’s say Drew has contributed the maximum annual amount to his FSA account ($3,050 in 2023) but he’s only used $2,000 of it by the end of his plan year. Let’s also say, Drew’s employer allows him to rollover up to $610 (the IRS maxmium for 2023) of unused funds to the following year and Drew elects to take advantage of this. That means that Drew will start the following plan year with a $610 balance in his FSA (plus any money his employer contributes at the beginning of the year) but he will forfeit the remaining $440. He can then choose to contribute up to the maximum allowed for that year or he can adjust his contributions to account for that rolled over amount.

Example 2: The Grace Period

Natasha has planned to contribute the maximum amount to her FSA ($3,050 in 2023) and her plan year ends December 31st. By November 15th, she’s only used $1,150 of her contributions. Without a grace period, Natasha might be scrambling to try to find ways to spend the remaining $1,900. But since her employer does give employees a 2 ½ month grace period, she has until March 15th to use her remaining FSA balance. Because of this, she’s able to schedule an elective procedure for January for which she uses her previous year balance to pay for the related out-of-pocket expenses.

The Run-out Period

Not to be confused with the FSA rollover or grace period, the FSA run-out period is the period of time your employer may offer for you to submit claims for expenses after the plan year ends, for expenses incurred during the plan year.

How do I know if my FSA allows rollovers?

It’s up to your individual employer whether or not they want to allow you to rollover any of your contributions. So to find out if your plan allows for this, contact your HR Department or FSA administrator. If you have any other questions regarding FSAs, check out Lively’s FSA guide.

Lauren Hargrave

Lauren Hargrave

Lauren Hargrave is a writer from San Francisco who focuses on technology, finance and wellness. She follows comedians like most people follow bands and believes an outdoor sweat session can cure almost any bad mood. She’s also been writing her first novel for so long, her mom doesn’t ask about it anymore.

piggy bank on pink background


2024 and 2025 HSA Maximum Contribution Limits

Lively · May 9, 2024 · 3 min read

On May 9, 2024 the Internal Revenue Service announced the HSA contribution limits for 2025. For 2025 HSA-eligible account holders are allowed to contribute: $4,300 for individual coverage and $8,500 for family coverage. If you are 55 years or older, you’re still eligible to contribute an extra $1,000 catch-up contribution.

comparing hsa versus fsa


What is the Difference Between a Flexible Spending Account and a Health Savings Account?

Lauren Hargrave · February 9, 2024 · 12 min read

A Health Savings Account (HSA) and Healthcare Flexible Spending Account (FSA) provide up to 30% savings on out-of-pocket healthcare expenses. That’s good news. Except you can’t contribute to an HSA and Healthcare FSA at the same time. So what if your employer offers both benefits? How do you choose which account type is best for you? Let’s explore the advantages of each to help you decide which wins in HSA vs FSA.

Benefits of HSA employer matching

Health Savings Accounts

Ways Health Savings Account Matching Benefits Employers

Lauren Hargrave · October 13, 2023 · 7 min read

Employers need employees to adopt and engage with their benefits and one way to encourage employees to adopt and contribute to (i.e. engage with) an HSA, is for employers to match employees’ contributions.

Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.



Stay up to date on the latest news delivered straight to your inbox