The FSA Forfeiture Deadline

A health flexible spending account is, by the underlying 'cafeteria plan' rule, a use-it-or-lose-it benefit: money not spent on qualifying expenses by the end of the plan year is forfeited to the employer, full stop. Any relief from that — a grace period or a carryover — is not automatic. An employer's plan document has to adopt one of the two permitted exceptions; an employee cannot assume either applies just because most large employers offer one.

IRS rules permit an employer to add either a grace period — typically framed as roughly two and a half extra months after the plan year ends during which unused funds may still be spent — or a dollar-capped carryover of unused funds into the next plan year, but never both in the same plan. Which one (if either) a given employer chose is written into that employer's own plan document, not set by statute for everyone; the carryover cap itself is a dollar figure the IRS adjusts periodically, so no specific amount is asserted here — check the current plan-year figure in your employer's own FSA plan documents.