If you have a Flexible Spending Account (FSA), you know it’s a fantastic way to save money on healthcare costs using pre-tax dollars. But as the year winds down, a common question pops up: what happens to the money I didn’t spend? Many people wonder, do FSA accounts rollover in the same way a 401(k) might? The answer isn’t a simple yes or no, and it depends entirely on the specific plan your employer has chosen.
So, Do FSA Accounts Rollover?
Traditionally, FSAs were known for their “use-it-or-lose-it” rule, meaning any unused funds at the end of the plan year were forfeited. However, the rules have evolved to offer some flexibility. There are now two primary ways you might be able to preserve your funds: a rollover option or a grace period. It’s crucial to check with your HR department or benefits administrator to see which, if either, your plan includes.
The Two Main Paths for Unused FSA Funds
First, there’s the rollover option. Some plans allow you to carry over up to a specific amount—the IRS limit is $640 for 2025—into the next plan year. This is a straightforward way to extend the life of your savings without any extra steps.
The second option is a grace period. Instead of a rollover, your plan might offer a grace period of up to 2.5 months after the plan year ends (until March 15th for a calendar-year plan). During this time, you can use the previous year’s funds for eligible expenses. It’s important to note that a plan will typically offer one of these features, not both.
Smart Strategies for Your FSA
To make the most of your account, proactive planning is your best friend. At the beginning of each year, carefully estimate your medical expenses. If you know your plan has a rollover, you might feel more comfortable contributing a steady amount. As the year ends, take stock of your balance. Consider using remaining funds for common eligible items like new glasses, prescription sunglasses, or stocking up on first-aid supplies and over-the-counter medications.
Navigating your FSA doesn’t have to be confusing. By understanding your plan’s specific rules regarding rollovers and grace periods, you can confidently manage your healthcare budget and ensure your hard-earned savings are put to good use.
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