Use It or Lose It
The FSA rule that forfeits unused funds at the end of the plan year, unlike HSAs which roll over.
What is Use It or Lose It?
"Use it or lose it" is the rule that any money left in your Flexible Spending Account (FSA) at the end of the plan year is forfeited. This is one of the biggest drawbacks of FSAs compared to HSAs.
Employers can soften this rule by offering either a grace period (2.5 months into the new year to spend old funds) or a carryover (up to $640 can roll to the next year). They can offer one but not both.
HSAs have no use-it-or-lose-it provision. HSA funds roll over indefinitely and are always yours. This is a major reason many people prefer HSAs when they qualify.
Frequently Asked Questions
Do HSAs have use-it-or-lose-it?
No. HSA funds roll over forever with no expiration. This is a key advantage over FSAs.
What are my options if I have FSA money left?
Spend it on eligible expenses before the deadline. Stock up on glasses, contacts, first aid supplies, or get dental work done.
Can my employer offer both grace period and carryover?
No. They can offer one or the other, but not both. Some employers offer neither, making the deadline even stricter.
Related Terms
Flexible Spending Account (FSA)
An employer-sponsored account that lets you pay for eligible healthcare expenses with pre-tax dollars, typically with a use-it-or-lose-it rule.
Health Savings Account (HSA)
A tax-advantaged savings account for people with high-deductible health plans to pay for qualified medical expenses.
Rollover
Unused HSA funds that carry forward to the next year, unlike FSA balances that typically expire.
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