There is a specific kind of financial pain that comes from losing money you already earned. Not spent badly, not invested poorly. Just handed back to your employer because a calendar date passed.
That is what happens to a lot of flexible spending account balances every December. The Employee Benefit Research Institute has been tracking this for years across millions of accounts, and the pattern barely moves. In 2023, roughly half of FSA holders forfeited funds, with the average loss at $436. The year before that, 52% forfeited an average of $441, up from 44% and $369 in 2019. Younger workers get hit hardest, mostly because they have fewer medical bills to spend the money on.
We are in September. If you elected an FSA for this plan year, you have somewhere between three and six months to fix this, depending on how your plan is written. That is plenty of time, but only if you know which deadline applies to you.
First, figure out which deadline you actually have
Everyone talks about “use it or lose it” like it is one rule. It is really three possible outcomes, and your employer picked one when they set up the plan.
The strictest version is the plain forfeiture rule. Plan year ends December 31, anything left goes back to the employer, done. Roughly a third of accounts in EBRI’s database work this way.
The second option is a grace period. The IRS lets employers extend the spending window by up to two months and 15 days, which for a calendar-year plan means March 15. Money is still there, you just have more time to incur expenses against it.
The third is carryover. Your plan lets you roll a capped amount into next year. For 2026 plan years that cap is $680, set by the IRS in Revenue Procedure 2025-32 alongside the $3,400 health FSA contribution limit. Anything above $680 still disappears.
Employers can offer a grace period or a carryover, not both. There is also a separate thing called a run-out period, which is a window after the plan year closes for submitting claims for expenses you already incurred. Ninety days is common. That is a paperwork deadline, not a spending deadline, and people confuse the two constantly.
Your benefits portal or your plan summary spells all of this out. It takes about four minutes to look up and it determines everything else you do.
Then look at the actual number
Log into your FSA administrator’s site and find your remaining balance. Not your election amount, your balance after claims paid.
One quirk worth knowing: with a health FSA, your full annual election is available on day one of the plan year, even though the money comes out of your paychecks gradually. That is the uniform coverage rule, and it is why an FSA can be genuinely useful when a big expense lands in February. It also means the number you see in September might be larger than you expect if you have not filed many claims.
Write the number down. If it is under a hundred dollars, a single trip to a drugstore solves it. If it is four hundred or more, you want a plan.
The eligible expense list is wider than most people assume
Here is where the recovery usually happens, because the mental model most of us carry around is “copays and prescriptions” and the real list is much longer.
The CARES Act permanently removed the prescription requirement for over-the-counter drugs, so allergy medicine, pain relievers, cold medicine, heartburn tablets and the rest are straight reimbursable now. Menstrual products count, including tampons, pads and period underwear. Sunscreen qualifies if it is broad spectrum with SPF 15 or higher, which covers most of what is on the shelf. Contact lens solution, first aid supplies, thermometers, blood pressure monitors, reading glasses, kids’ sunscreen, bandages, heating pads.
Bigger items count too. Dental work you have been putting off. New glasses or a spare pair. Contacts for the year. A chiropractor visit. Physical therapy. Acupuncture. Prescription sunglasses. If you have been deferring a dental crown or a specialist appointment because of the out-of-pocket cost, that is exactly what this money is for, and December appointment slots fill up fast.
The IRS keeps the authoritative rules in Publication 502, and GoodRx maintains a readable list of the items that surprise people. Your plan administrator may also have its own eligible item catalog, which is the safest place to check for anything borderline.
Spend it on things you were going to buy anyway
This is the part where people go wrong. There is a version of FSA spend-down that turns into a December shopping spree on stuff nobody needs, and that is not saving money. It is spending 100 cents to avoid losing a dollar you had already written off.
The better approach is to look at what your household buys regardless. If you go through a bottle of allergy medicine a month, buy six months of it. If your kid needs sunscreen every summer, stock up now. If your contacts run out in April, order the annual supply in December. Same purchases, just moved forward in time and paid for with pre-tax dollars.
That last part is the actual benefit. FSA money escapes federal income tax and the 7.65% you pay in Social Security and Medicare taxes. Someone in the 22% bracket is effectively getting close to a 30% discount on every eligible dollar. Buying $400 of things you genuinely use with FSA money instead of your checking account is worth roughly $118 in avoided tax. Buying $400 of things you do not need is worth nothing.
Dependent care FSAs play by different rules
If you have a dependent care FSA, treat it as a separate problem. The money is not available upfront the way health FSA money is. You can only be reimbursed for what has actually been contributed so far, and the eligible expenses are narrower: daycare, preschool, before and after school care, day camp, and care for an adult dependent while you work.
The 2026 limit went to $7,500 per household, which is the first increase to that cap since 1986. That is a meaningful change if you are paying for childcare, and it is worth revisiting when you set next year’s election.
Use what you learn for open enrollment
Open enrollment season is starting at most employers right now, which makes this the ideal moment to run the math on next year.
If you are scrambling in December, you elected too much. If you burned through your balance by June and paid the rest out of pocket, you elected too little. The honest way to set the number is to add up what you actually spent on health care over the past twelve months, subtract anything your insurance covered, and use that as your baseline. Then adjust for anything you know is coming, like braces, a planned procedure, or a new prescription.
And if your plan offers the $680 carryover, an election slightly above your baseline carries almost no risk. That is the version of this account worth having.
The money in that account is already yours. It came out of your paycheck. Spending an hour in September figuring out how to keep it is a better return than almost anything else you will do with your time this month.
