If you have a flexible spending account through work, there's a decent chance you're about to forfeit money you already earned.
Most FSA plans operate on a calendar year, which means balances typically need to be spent by December 31 — or by a short grace period your employer may or may not offer.
Here's the catch that trips people up: you can't just log into a portal and cash out the leftover balance.
FSA funds are use-it-or-lose-it by federal rule, with two narrow exceptions employers can choose to adopt.
One is a grace period of up to 2.5 months into the next year.
The other is a carryover, capped at $640 for 2025 plans, indexed annually.
Many workers assume their plan has one of these safety nets.
And even when they do, the rules vary wildly from employer to employer, so a coworker's experience at a previous job tells you nothing about your own.
A 2024 Employee Benefit Research Institute survey found a meaningful share of account holders forfeit funds each year, and average balances often run into the hundreds of dollars.
That's real money taken out of paychecks, pre-tax, that simply evaporates.
What makes this especially frustrating is the psychological setup.
Payroll deductions happen automatically, so the money never feels like it hit your bank account.
Then the deadline arrives during the most expensive month of the year, when nobody has spare hours to audit receipts.
If you're staring down a balance, the practical moves are straightforward.
Eligible expenses go well beyond doctor visits — think prescription glasses, contact lenses, bandages, thermometers, menstrual products, breast pumps, and certain over-the-counter medicines thanks to recent rule changes.
Dental work, therapy copays, and even some travel for medical care can qualify.
The FSA Store and similar sites exist specifically to help people drain balances, which tells you how common the panic is.
But be careful: buying stuff you don't need just to avoid forfeiting is a losing trade.
Spending $200 to save $150 in taxes is still a $50 loss.
Also worth checking: whether your plan offers a debit card, whether you can submit claims for expenses already paid out of pocket earlier this year, and whether dependent care FSA funds follow different rules.
One more thing people miss — if you're leaving your job, your FSA typically doesn't follow you.
Depending on your plan, you may have a run-out period to submit claims for expenses incurred before your last day, but you generally can't keep contributing or spending afterward.
The uncomfortable truth is that FSAs are designed to benefit employers and the tax code more than they benefit you.
Guess too low and you miss the tax break.
Guess too high and you donate the difference to your company's bottom line.
My take: if you consistently forfeit money, stop maxing out the account.
Contribute a conservative number you know you'll spend, and treat the tax savings as a bonus rather than a target.
Final Thoughts
An FSA should be a modest win, not a December scavenger hunt.