After year-end, any money left over in an employee FSA will be turned over to the employer with three small exceptions (these are are at the discretion of the employer):
- Grace Period: An additional two and a half months (until March 15th assuming a plan year that starts on January 1st) is granted to the employee for any new expenses that can be used from money in the FSA from the prior year. After the grace period, any remaining money will be turned over to the employer.
- Carryover: For 2022, employees can carry a maximum amount of $570 unused balance to the next plan year if allowed by his/her employer. Any additional dollars above $570 will be forfeited. Please note, the $550 maximum is in addition to the current year pre-tax contribution limit set by the IRS.
Note: Your employer may allow additional carryover amounts from 2021 to 2022 due to the Consolidated Appropriations Act of 2021. See IRS Notice 2021-15 for more details.
- Run-Out Period - This is the additional time, after the plan year ends, that an employee can file a claim that occurred in that plan year.
An employer can offer either a grace period or carryover, not both.