A:

Flexible Spending Accounts (FSAs) do expire and are considered to be a "use it or lose it" type of plan. They are savings accounts provided by employers to allow employees to defer portions of their salaries to be reimbursed for eligible expenses, such as medical or dependent care expenses. These deferrals are pretax, and as long as employees use the funds toward eligible expenses, the expenses are considered tax-free. As of 2015, the maximum salary reduction a person can put toward an FSA is $2,550.

Grace Period or Carryover

Any money deferred into an FSA during the calendar year is forfeited if it is not claimed by the expiration deadline. However, some plans may offer a grace period or carryover. A grace period is a certain amount of time in which the employee may submit a claim that may go past the end of the calendar year; the grace period tends to be around two to three months. However, once the grace period expires, all unused balances are forfeited.

Some FSA plans also offer a carryover, where plans may allow up to $500 of any unused balance to be used for the following year's expenses. The FSA plan specifies this limit, and it may be less than the maximum of $500.

It is important to understand specifically how your FSA works, as every plan is different. Each FSA may have a set expiration date, grace period or carryover, so review your plan documents or call your plan provider to get further clarification.

RELATED FAQS
  1. Does money in a Flexible Spending Account (FSA) roll over?

    Get the latest information regarding current IRS regulations on how much money can be carried over from one year to the next ... Read Answer >>
  2. Are Flexible Spending Account (FSA) contributions tax deductible?

    Discover if contributions to your Flexible Spending Account (FSA) are tax deductible. Learn how it can reduce your taxable ... Read Answer >>
  3. Do flexible spending accounts (FSA) funds roll over?

    Learn more about how flexible spending accounts (FSAs) are established, policies on rolling over funds, and what costs can ... Read Answer >>
  4. Dental coverage on flexible spending account (FSA)

    FSAs can be used to pay for certain dental expenses, including deductibles and co-payments. However, not all types of dental ... Read Answer >>
  5. Does a Flexible Spending Account (FSA) cover teeth whitening?

    Learn about Flexible Spending Accounts (FSAs), and understand the medical expenses on which an individual cannot use FSA ... Read Answer >>
Related Articles
  1. Insights

    Healthcare FSAs Increase Your Personal Savings

    This benefit could give you a return this year that puts many other investments to shame.
  2. Insurance

    Benefits Of A Dependent Care Flexible Spending Account

    These accounts can lower your taxable income and help you support a dependent family member.
  3. Personal Finance

    A Quick List of FSA Eligible Expenses

    The ABCs of FSAs: What you can and can't use your Flexible Spending Account funds for.
  4. Taxes

    Benefits Of A Dependent Care FSA

    Here's how your Dependent Care FSA works and how you can use it to your advantage as a parent with dependents.
  5. Insurance

    What Does A Flexible Spending Account Let You Buy?

    A healthcare FSA will help you pay your medical expense with pre-tax dollars – just not all of them. Here's how to tell which costs are covered.
  6. Financial Advisor

    HSA vs. FSA: Navigating the Alphabet Soup

    HSA vs. FSA: Here's a cursory view of these two types of workplace savings accounts to help you make the proper decision in making your elections.
  7. Small Business

    Year-End Finance Tips for Small Firms and Freelancers

    Here's a robust end-of-the year tax-prep checklist for individuals and entities that earn 1099 income.
  8. Managing Wealth

    How to Use a Limited Purpose FSA

    This type of flexible spending account may be used to cover the cost of certain qualified medical expenses with pre-tax dollars; here is how it works.
  9. Insurance

    How to Best Use Health Saving Accounts

    Health savings accounts' hidden bonus: they double as retirement accounts.
  10. Managing Wealth

    4 Reasons To Use Your Benefits Before Year-End

    In some situations, you're better off taking care of medical and dental work now than waiting until next year.
RELATED TERMS
  1. Grace Period

    A grace period is a provision in most loan contracts which allows ...
  2. Insurance Grace Period

    An insurance grace period is a defined amount of time after the ...
  3. Financial Services Agency - FSA

    Financial Services Agency, or FSA, is a Japanese government entity ...
  4. Financial Services Authority - FSA

    Regulating body for all providers of financial services in the ...
  5. Expired Card

    An expired card is a credit card no longer usable because its ...
  6. Past Due

    Past due is a loan payment that has not been made as of its due ...
Hot Definitions
  1. Monero

    Monero is a digital currency that offers a high level of anonymity for users and their online transactions.
  2. Risk Tolerance

    Risk tolerance is the degree of variability in investment returns that an individual is willing to withstand.
  3. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  4. Initial Coin Offering (ICO)

    An Initial Coin Offering (ICO) is an unregulated means by which funds are raised for a new cryptocurrency venture.
  5. Federal Funds Rate

    The federal funds rate is the interest rate at which a depository institution lends funds maintained at the Federal Reserve ...
  6. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
Trading Center