Flexible Spending Accounts (FSAs) provide an important means for employees to allocate pre-tax dollars toward healthcare-related spending, effectively lowering monthly healthcare expenses through tax savings. However, these accounts come with a significant caveat: funds typically must be used within a designated timeframe to avoid forfeiture. Unlike Health Savings Accounts (HSAs), where funds can be invested and can accumulate beyond the calendar year, FSAs impose stricter spending deadlines.
For many participating in FSAs for the 2025 plan year, the primary deadline to utilize those contributions was December 31, 2025. Yet, depending on the terms established by the employer, account holders might have additional time to spend remaining funds before they expire irrevocably.
FSAs function on a use-it-or-lose-it basis. While HSAs offer investment options and no expiration on funds, FSAs generally require spending within a plan year. This fundamental difference means that money placed in an FSA must be carefully budgeted and used before the cutoff date to avoid losing those pre-tax contributions.
Employers may provide two main options for extending the period during which funds can be spent: a grace period or a rollover option. Some plans incorporate a grace period allowing employees to spend leftover funds up to 2.5 months into the following year, typically until March 15, 2026, for the 2025 plan's contributions. Alternatively, some employers permit rolling over a limited amount of funds, with the maximum rollover for the 2025 plan year set at $660.
It is crucial for employees to consult with their employer or benefits administrator to confirm which options are available under their FSA plan. Not all plans incorporate either the grace period or rollover provisions, and the absence of these can significantly affect available time to use remaining funds.
For those who find themselves with unspent FSA money and have access to a grace period or rollover provision, prompt action is necessary to allocate those funds before their expiration. Failing to spend leftover money within the specified timeframe results in forfeiture, effectively losing contributions that could have otherwise offset healthcare expenses.
Given the urgency and restrictions involved, understanding practical ways to deploy remaining FSA funds is critical. There is a broad spectrum of eligible expenses and products for which FSA dollars can be used. Below are ten examples of common medical-related services and items that may qualify:
- Dental treatments including routine cleanings and cavity fillings
- Over-the-counter medications
- Vision care such as exams and prescription eyeglasses
- First aid essentials like bandages and medical dressings
- Chiropractic services
- Contact lenses and lens cleaning solutions
- Cough suppressants or throat lozenges
- Vaccinations including influenza shots
- Menstrual care products
- Massage therapy treatments
This list represents a fraction of the diverse set of eligible expenditures within FSA guidelines. Many healthcare-related purchases and services fall under qualified expenses, offering flexibility to utilize the funds in ways that align with personal health needs.
Those seeking a comprehensive inventory of eligible items and services should refer to official FSA resource lists, which detail approved healthcare products and treatments. Confirming product eligibility aids in effective planning and ensures FSA funds are spent appropriately without delay.
To maximize the benefit of any remaining 2025 FSA funds, individuals should coordinate their healthcare spending plans in advance of the final deadline or the end of any grace period. Being proactive and informed about permissible uses is essential for preserving the tax advantages that FSAs provide, otherwise, unspent contributions may ultimately be forfeited.
In summary, flexible spending accounts are useful tools for managing healthcare costs efficiently through pre-tax contributions. However, they require careful management due to their use-it-or-lose-it nature. By understanding plan-specific provisions and being strategic about eligible healthcare expenditures, participants can protect and optimize their FSA investments before time runs out.