There's a peculiar kind of panic that sets in every March for millions of American workers.
It's the deadline to spend down the money sitting in a flexible spending account, and for a lot of people, that money is going to evaporate.
An FSA lets you set aside pre-tax dollars for medical or dependent care expenses.
The trade-off, and it's a brutal one, is that most accounts operate on a use-it-or-lose-it basis.
Miss the deadline and the balance doesn't roll into your savings account.
The rules vary more than people realize, which is where the trouble starts.
Some plans give you until December 31 to spend the money.
Others offer a grace period, typically until March 15, to incur new expenses.
A third option lets you carry over a limited amount, capped at $640 for 2025, into the next year.
Your specific plan might offer one of these, none of them, or some combination.
The only way to know is to read the summary plan description, and yes, it's as thrilling as it sounds.
The dependent care version is even less forgiving.
That money is for daycare, after-school programs, or summer camp so you can work.
If your kid aged out or your childcare situation changed, you may be stuck with funds you can't legally use.
No grace period rescues you there in many cases.
Your employer keeps the forfeited funds, though rules require the money to be used to offset plan administrative costs or benefit other participants.
It rarely flows back to the workers who overestimated their needs.
That's the part nobody mentions during open enrollment.
The forecasters at the benefits consulting firms will tell you the average forfeiture runs into the hundreds of dollars per person.
Multiply that across a workforce and you're talking real money quietly changing hands, all because predicting your family's medical needs a year in advance is basically a guessing game.
If you're staring down a balance right now, the practical moves are limited but real.
You can stock up on eligible over-the-counter items, though the pandemic-era rule that allowed any OTC purchase without a prescription expired.
Today you generally need a prescription for medications, though many first-aid and menstrual products remain eligible without one.
You can schedule that dental cleaning, refill contact lenses, or finally get the glasses you've been squinting past.
Therapy sessions, copays, and prescription sunglasses all count.
What you should not do is panic-buy a decade of bandages just to zero out the account.
That's spending money to avoid losing money, which is a different and worse deal.
The deeper issue is that FSAs ask workers to gamble on their own future health and childcare needs, then punish them for guessing wrong.
An HSA, by contrast, rolls over indefinitely and can be invested.
But you need a high-deductible health plan to qualify, and not everyone has that option.
My take: the deadline is a feature, not a bug, for the companies administering these accounts.
The system works beautifully for people with predictable expenses and punishes everyone else.
Before you scramble, check your plan's actual rules and your employer's forfeiture policy.
Final Thoughts
Then ask yourself whether you're spending to use the money or using the money because you actually need something.