The tax rules start from forfeiture: whatever is left in your health FSA when the plan year closes is gone. On top of that floor your employer can bolt on one of two softeners, and it is free to bolt on neither. So the real answer to "does my FSA roll over" is a fact about your plan document, not a fact about FSAs. Here is what each option does, how to check which one you have, and where the money goes if you have neither.
Does an FSA Roll Over? The Three Things Your Plan Can Do
Forfeiture is the default. On top of it your plan may add a carryover, or a grace period, or nothing at all, and those are the only three outcomes that exist. The IRS sets the ceiling on each one; your employer's plan document makes the choice.
The default has a name. IRS Notice 2013-71 states it this way: "Commonly referred to as the 'use-or-lose' rule, this requires that unused benefits or contributions remaining as of the end of the plan year ... be forfeited." Publication 969 puts it plainer: "FSAs are generally 'use-it-or-lose-it' plans. ... However, the plan can provide for either a grace period or a carryover."
Read that last sentence closely, because "can" is doing all the work. IRS Notice 2013-71 hands the decision to your employer: an employer, "at its option, is permitted to amend its § 125 cafeteria plan document" to add a carryover, "the plan may specify a lower amount as the permissible maximum," and "the plan sponsor has the option of not permitting any carryover at all."
One framing note carries the rest of this page: all of it runs on your plan year, not the calendar. For most people those are the same thing and the deadline is December 31, but on a July-to-June plan year every date below shifts with it. If you are still working out how the account itself functions, start with what an FSA is.
How Much FSA Money Can Roll Over in 2026?
For a plan year beginning in 2026, the maximum carryover the IRS allows is $680, and that is a ceiling rather than a promise. Your plan can set a lower figure or offer no carryover at all. Whatever does move forward is extra money on top of next year's election.
Revenue Procedure 2025-32, announced in IR-2025-103, sets both 2026 numbers in one sentence: "For taxable years beginning in 2026, the dollar limitation under § 125(i) on voluntary employee salary reductions for contributions to health flexible spending arrangements is $3,400. If the cafeteria plan permits the carryover of unused amounts, the maximum carryover amount is $680."
The $680 is not arbitrary, and almost nobody explains where it comes from. Notice 2020-33 tied the carryover ceiling to the contribution limit, setting it "to an amount equal to 20 percent of the maximum salary reduction contribution under § 125(i) for that plan year." Twenty percent of $3,400 is $680. The number attaches to the plan year the money came from, so it is a 2026 plan-year balance that is capped at $680 on its way forward.
That $680 costs you nothing at the front end either. Notice 2013-71 states that a carryover "does not count against or otherwise affect the indexed ... salary reduction limit applicable to each plan year," so you can elect the full $3,400 for next year and still take the carryover on top of it.
The 2027 figures are pending. They land in the IRS's fall revenue procedure, the same release that carried the 2026 numbers, and our HSA and FSA contribution limits guide holds the table and will carry them first.
Carryover or Grace Period: Why a Plan Can Offer One but Never Both
A plan can adopt a carryover or a grace period, and the IRS forbids both in the same health FSA. They are also not the same size of cushion. A carryover moves a limited amount forward and gives you a full year to spend it; a grace period covers your entire remaining balance and gives you about ten extra weeks.
The IRS states the either-or directly, in Notice 2013-71: "A plan adopting this carryover provision is not permitted to also provide a grace period with respect to health FSAs."
The grace period came first. Notice 2005-42 created it and fixed its length, saying it "must not extend beyond the fifteenth day of the third calendar month after the end of the immediately preceding plan year to which it relates (i.e., 'the 2 and 1/2 month rule')." On a calendar-year plan that lands on March 15. The IRS describes the effect as giving you "as long as 14 months and 15 days" to use one plan year's money.
Here is the trade nobody spells out. A grace period is generous in amount and stingy in time: it covers everything left, but whatever is unspent when it ends "may not be carried forward to any subsequent period (including any subsequent plan year)," in the IRS's words. A carryover is the reverse, moving a limited slice that is then yours for the whole next plan year. Finish with $2,000 sitting there and the grace period is worth far more to you; finish with $400 and no urgent need, and the carryover is.
All of that is a health FSA feature. A dependent care FSA can have a grace period, and Notice 2013-71's carryover does not reach it.
A Run-Out Period Is Not Extra Time to Spend
A grace period buys you time to incur new expenses. A run-out period buys you time to submit claims for expenses you already incurred. The IRS draws that line itself, and mixing the two up is how people lose money they thought they still had.
Footnote 3 of Notice 2013-71 sets them side by side: "A 'run-out period' is a period immediately following the end of a plan year during which a participant can submit a claim for reimbursement of expenses incurred for qualified benefits during the plan year. ... By contrast, a grace period is a period of up to two months and 15 days immediately following the end of a plan year during which a participant may use amounts remaining from the previous plan year (including amounts remaining in a health FSA) to pay expenses incurred for certain qualified benefits during that two-month-and-15-day period."
So a run-out window changes how long you have to file, not what you are allowed to buy. Say your plan year ended December 31 and you have until March 31 to submit claims. A January purchase can be paid from last year's balance when your plan also has a grace period. With only a run-out window, last year's balance is there to settle last year's expenses, and that January purchase runs against the new plan year instead. The IRS makes the same point for carryover plans: prior-year money pays prior-year expenses "only if claimed during the plan's run-out period."
| Feature | What it actually does | How much it covers | When it ends |
|---|---|---|---|
| Carryover | Moves unused money forward into the next plan year | Up to $680 of a 2026 plan-year balance | Usable across the whole following plan year |
| Grace period | Gives you extra time to incur new eligible expenses | Your entire remaining balance | Up to 2 months and 15 days after the plan year ends (March 15 on a calendar-year plan) |
| Run-out period | Gives you extra time to submit claims for expenses you already incurred | Nothing new. It adds filing time, not spending power | A deadline your plan sets after the plan year ends |
How to Find Out Which One Your Plan Has
Three documents will tell you, and one screen will mislead you. Your Summary Plan Description is the document that governs, your administrator's plan-details page is the fastest confirmation, and your balance on its own will not tell you which rule you are under.
- Start with your Summary Plan Description. For an employer plan covered by ERISA, federal regulation makes the SPD carry "a statement clearly identifying circumstances which may result in disqualification, ineligibility, or denial, loss, forfeiture, suspension, offset, reduction, or recovery ... of any benefits." Losing a balance at year-end is a forfeiture, so it has to be in there. Search the file for "carryover," "grace period," and "run-out."
- Then your open-enrollment packet or benefits guide. It usually states the answer in a single line, and you already have a copy.
- Open your plan administrator's portal and find the plan-details or plan-rules screen. That is a different screen from your balance, and it is the one that names the feature.
- Ask HR three specific questions. Does my plan have a carryover or a grace period? What is the last day I can incur an expense? What is the last day I can submit a claim? Add a fourth if you are not re-electing next year: does keeping my carryover depend on enrolling again?
- Do not read the answer off your balance. A balance still showing in January could be a carryover, a grace-period balance, or a closed plan year with an open run-out window. The number looks identical in all three cases, and the three have different deadlines.
What Happens to FSA Money You Don't Use
Money still sitting there after your run-out period closes goes back to your employer's plan. It cannot be paid out to you in cash and it cannot be turned into another benefit, and the IRS closes that door in as many words.
Notice 2013-71: "A § 125 cafeteria plan is not permitted to allow unused amounts relating to a health FSA to be cashed out or converted to any other taxable or nontaxable benefit." Publication 969 gives the consumer-facing half of the same rule: "Your employer isn't permitted to refund any part of the balance to you."
The same architecture runs in your favour earlier in the year, which almost nobody mentions. Under the uniform coverage rule in IRS Notice 2013-71, your full annual election has to be available "for claims incurred at all times during the period of coverage." You can claim the whole $3,400 in February having contributed two months of it, and if you leave before payroll catches up, the shortfall sits on the plan side rather than yours.
This is also the structural difference between the two accounts people mix up. FSA money runs on a plan-year deadline; HSA money is yours and carries forward with no year-end deadline. Our HSA vs FSA comparison walks the rest of the split.
Carryover Mechanics: Which Dollars Get Spent First, and Do They Expire Too?
Carried-over money is real money with its own rules. There is no universal spending order, carried-over dollars are good across the whole following plan year, and the IRS's own worked example keeps a carryover alive for someone who stops contributing.
Which dollars get spent first. Consumer guides state this as a fixed rule; the IRS text says the opposite of fixed. Notice 2013-71 says a plan "is permitted to treat reimbursements of all claims for expenses that are incurred in the current plan year as reimbursed first from unused amounts credited for the current plan year and, only after exhausting these current plan year amounts, as then reimbursed from unused amounts carried over from the preceding plan year." Permitted, not required, and current-year money first. There is no single answer here, only your plan's.
Do carried-over funds expire too? They do, at the end of the year they land in, and you get that whole year to use them. Notice 2013-71 says a carryover "may be used to pay or reimburse medical expenses under the health FSA incurred during the entire plan year to which it is carried over."
Do you have to enroll again to keep it? The IRS notice does not make a new election a condition of keeping a carryover. Its own Example 4 walks through a participant who elects no salary reduction for the following year, and the carried-over balance, in the IRS's words, "is not forfeited." What the notice does not address is whether a plan may impose an enrollment condition of its own, which is why that sits on the list of questions for HR above.
Using It Before You Lose It
If you are reading this in December, the rule matters less than the calendar. Book the care you already need first, because appointments, dental work and vision exams are unambiguous and reimburse fast. Then look at products, which is where most people leave money behind, and our guide to FSA eligible items covers what qualifies and what does not.
A lot of the wellness gear people want is dual-purpose: general-use for most buyers, and medical care for someone managing a named condition. That is where a Letter of Medical Necessity issued by a licensed provider does the work, tying the item to a specific health condition. Publication 502 frames the whole question as one of purpose: "Medical care expenses must be primarily to alleviate or prevent a physical or mental disability or illness." Many administrators want that letter on file before you buy, which is exactly why a late-December scramble goes wrong, and why it is worth sorting out now.
