FSA Use It or Lose It Rules 2026: What You Need to Know

What is the use-it-or-lose-it rule?

Under IRS rules, FSA funds that aren't used for eligible expenses by your plan's deadline are forfeited. Unlike an HSA which rolls over indefinitely, an FSA is a spend-it-or-lose-it account. The IRS made this rule permanent — it's not going away.

The good news is employers have two options to soften the rule, and many have adopted at least one of them:

How to find out which rule applies to you

The easiest way is to log into your FSA benefits portal (WageWorks, HealthEquity, PayFlex, etc.) and look for your plan end date and any rollover or grace period information. Alternatively, check your Summary Plan Description or ask HR directly: "Does our FSA plan offer a grace period or rollover, or is it a hard December 31st deadline?"

How much do people actually forfeit?

Americans forfeit over $3 billion in FSA funds every year. The average forfeited amount is around $339 per account — but employees with larger balances can lose significantly more. This money goes directly back to the employer, who can legally use it to offset plan administration costs.

What counts as "using" FSA funds?

To count, an expense must be incurred before the deadline — not just ordered or scheduled. The date of service is what matters, not the date you submit the claim. You typically have 90 days after the plan year ends to submit claims for expenses incurred during the plan year, even if the deadline has passed.

This means if you see a doctor on December 30th, that expense qualifies for your 2026 FSA even if you don't submit the claim until February 2027.

Fast ways to spend your FSA before the deadline

• Schedule overdue appointments: Dentist, eye exam, dermatologist, physical — anything you've been putting off
• Order prescription glasses or contacts — including a backup pair
• Stock up on OTC medications: Pain relievers, allergy medicine, cold/flu, antacids, sleep aids
• Buy sunscreen (SPF 15+) — fully eligible, no prescription needed
• Menstrual care products — tampons, pads, cups, all eligible
• First aid supplies: Bandages, thermometer, blood pressure monitor
• Mental health sessions — book therapy sessions before year end
• Hearing aid batteries — stock up if you use them

FSA grace period vs rollover — which is better?

The grace period gives you more time to spend, which is useful if you tend to have large expenses early in the new year. The rollover lets you keep up to $640 indefinitely, which is useful if you consistently underspend. Neither is strictly better — it depends on your spending patterns. The worst outcome is a plan with neither option.

Can you change your FSA election mid-year?

Generally no — FSA elections are locked in during open enrollment. However, certain qualifying life events allow mid-year changes: marriage, divorce, birth of a child, change in employment status, or a significant change in your spouse's benefits coverage. Outside of these events, you're committed to your annual election.