Year-End Rollovers for FSA Plans

By Kathryn O'Connor, PHR, SHRM-CP, CCP, GRP, Director, Compensation Services
Published January 21, 2025

HR professionals have the important task of helping employees navigate the year-end rollover process for health care Flexible Spending Accounts (FSAs). By communicating clearly and planning ahead, employees can get the most out of their benefits while staying compliant with IRS rules.

FSAs used to follow a strict "use-it-or-lose-it" rule. If a plan participant didn't spend their funds by the end of the plan year, the money was gone. Fortunately, the IRS offers some helpful options to prevent losing unspent healthcare FSA funds. 

FSA Rollover
An FSA rollover allows the carryover of funds from one plan year to the next. The employer determines the amount of the rollover (up to the IRS limit). Currently, employers who have elected to include an FSA rollover plan provision can allow participants to carry over up to $640 from their 2024 FSA into 2025.

FSA Grace Period
The other option employers may offer is a 2 ½ month grace period. This gives plan participants the ability to spend the remainder of the previous year's FSA funds before March 15 (for FSA plans ending December 31), after which any unspent funds are forfeited back to the employer.

HR professionals should ensure their FSA plan documents clearly explain which option, rollover or grace period, is available, because employers can't offer both. Keeping employees in the loop with timely reminders about deadlines and FSA-eligible expenses is crucial. 

Helping employees make the most of their FSA dollars doesn't just reduce benefit forfeitures, it can also boost employee satisfaction. With proactive planning and timely guidance, you'll help your team start the new year with a solid understanding of their benefits.

HR Source members with questions can contact us through the HR Hotline Online or at 800-448-4584.