FSA Rollover and Renewals: Helpful Answers to Common Questions

Overview

• Prior-year expenses: No — you cannot use funds from a prior plan year for expenses incurred before the current plan year start.
• Health FSA carryover: Yes — up to current IRS cap (e.g., $610 in 2024, $660 in 2025, $680 in 2026) if employer elects carryover. (HealthCare.gov)
• Grace period: Yes — up to 2½ months (plan year end + 2½ months). (HealthCare.gov)
• Run-out period (submit only): Yes — typically 90 days after plan year end to submit claims. (Captain Contributor)
• Carryover + grace: No — a health FSA may offer either a carryover or a grace period, not both. (HealthCare.gov)
• DC FSA rollover: No — dependent care FSAs do not allow carryover. (FSAFEDS)
• HSA compatibility: General-purpose health FSA carryover/grace may prevent HSA eligibility; LPFSA-only avoids this restriction. (Note: IRS Pub. 969 context) (IRS)

Learn about rolling over your FSA

Some organizations offer employees a flexible spending account benefit. An FSA is a program whereby people put pre-tax money into an account to pay for out-of-pocket health care costs. FSA-approved expenses include things like medical deductibles, co-payments, prescriptions and medical devices. Employers may offer a health care FSA, dependent care FSA, or both. Details pertaining to FSA rollover, renewal and other aspects vary, so it's wise to acquire a basic understanding.

As information about FSA plans can get confusing, we've answered a list of the most common questions we receive.

Current Limits by Year

IRS figures; employer may set lower limits.

Mini Glossary / Definitions

• Incur vs. Submit:Incur = when expense happens; Submit = when you file proof. (Captain Contributor)
• Carryover/Rollover: IRS-allowed amount of unused HCFSA/LPFSA funds carried to next year (cap applies). (HealthCare.gov)
• Grace Period: Option giving extra time after plan year to incur new expenses. (HealthCare.gov)
• Run-Out Period: Time after plan year to submit claims for prior year expenses. (Captain Contributor)
• Plan Year vs. Tax Year:Plan year is employer’s benefit period; tax year is calendar year.
• HCFSA vs. LPFSA vs. DCFSA: Health care, limited-purpose (vision/dental), Dependent care accounts.

Q&A

1) Can employees use funds from a prior plan year?

Short answer: No.

Details:

• Prior-year funds must be used within the plan year/run-out/grace if offered.
• You cannot apply current FSA funds to expenses incurred before the plan year.
• Grace or carryover does not change that rule. (HealthCare.gov)

Examples:

• Plan year Jan 1–Dec 31 2024: expenses before Jan 1 2024 not eligible.
• Plan year Jul 1 2024–Jun 30 2025: expenses before Jul 1 2024 not eligible.

2) What’s the difference: rollover, carryover, grace period?

Short answer: Carryover = next-year money; grace = extra spending window.

Details:

• Carryover: Unused HCFSA/LPFSA can be carried to next year (cap limit). (HealthCare.gov)
• Grace period: Gives ~2½ extra months after year end to incur new expenses. (HealthCare.gov)
• Must choose either carryover or grace (not both). (HealthCare.gov)

Examples:

• Dec 31 2025 plan with grace: spend through Mar 15 2026.
• Dec 31 2025 plan with carryover: up to $660 moves to 2026 plan.

3) What happens at FSA plan end?

Short answer: Depends on employer-range option: carryover, grace, or use-or-lose.

Details:

• Carryover moves unused to next year (if offered).
• Grace allows extra time to incur eligible expenses. (HealthCare.gov)
• If neither offered, funds are forfeited (“use-or-lose”). (HealthCare.gov)
• All scenarios include a run-out to submit claims. (Captain Contributor)

Examples:

• Dec 31 2024 plan w/ carryover: up to IRS cap moves to 2025.
• Jun 30 2025 plan w/ grace: incur expenses through ~Sep 15 2025.

4) What happens to LPFSA funds at plan end?

Short answer: Same rules as HCFSA but only for dental/vision.

Details:

• LPFSA is limited to dental/vision expenses.
• Same carryover/grace/run-out rules as health FSAs.
• Employer plan design determines which option applies.

Examples:

• Jan–Dec LPFSA w/ carryover: unused moves (cap).
• Jul–Jun LPFSA w/ grace: incur through 2½ months post.

5) Does LPFSA limit reset if you join another employer?

Short answer: Yes.

Details:

• Contribution eligibility resets under new employer plan. 
• You may contribute up to the annual limit again. 
• Applies to both HCFSA and LPFSA. 

Examples:

• 2024 LPFSA limit $3,050 at Employer A; join Employer B and contribute up to $3,050 again.

6) Do dependent care FSAs allow rollover?

Short answer: No.

Details:

• DCFSA does not allow funds to carry over to next year. (FSAFEDS)
• Employer may offer a grace period for DCFSA. (FSAFEDS)
• Any remaining after grace/run-out is forfeited. (FSAFEDS)

Examples:

• DCFSA year end Dec 31 w/ grace → incur through ~Mar 15.
• Plan without grace → unused funds forfeit.

7) How do I renew my company’s FSA plan?

Short answer: Your company renews the FSA near the end of the plan year through the benefits platform (usually by the primary/benefits administrator), and if you miss the renewal window, the effective date typically cannot be backdated.

Details:

• Renewal is typically completed by the primary administrator or benefits administrator (often HR).
• Renewal happens near plan year end to keep FSAs available for the next plan year.
• If the employer misses the renewal period, the plan’s effective date usually cannot be changed retroactively.
• After the employer renews, employees are prompted to renew or cancel their elections by a stated deadline.

Example A: Calendar-year plan ending Dec. 31

• Nov. 28: Admin can begin renewal in the platform.
• Nov. 28 / Dec. 5 / Dec. 10: Platform sends reminder emails to the admin.
• Dec. 15: Employer renewal deadline.
• Dec. 15 & Dec. 20: Employee reminder emails sent after renewal is completed.
• Dec. 25: Employee deadline to confirm enrollment preferences.

Example B: Non-calendar plan ending June 30

(Using the same relative timeline pattern shown above.)

• May 28: Admin can begin renewal.
• May 28 / June 4 / June 9: Admin reminder emails.
• June 15: Employer renewal deadline.
• June 15 & June 20: Employee reminder emails.
• June 25: Employee deadline to confirm elections.

Edge-case callout (for extractability):

• Missed renewal window: Effective date is usually not retroactive, so employees may not have uninterrupted FSA coverage for the intended start date.

Common Edge Cases & Nuances

• Employer may set a lower carryover cap than IRS maximum. (HealthCare.gov)
• DCFSA has no rollover allowed. (FSAFEDS)
• Carryover vs. grace: only one option per plan year. (HealthCare.gov)
• Run-out = claim submission only, not incurring new expenses. (Captain Contributor)
• HSA eligibility: General-purpose health FSA with carryover/grace can block HSA contributions; LPFSA-only avoids this limitation. (IRS)

Sources

• IRS Publication 969 – Health FSA & HSA rules. (IRS)
• HealthCare.gov – FSA carryover/grace period basics. (HealthCare.gov)
• IRS carryover limits (2025/2026) – Updated carryover amounts. (EPIC Insurance Brokers & Consultants)