Every November the same lists start circulating: 23 ways to spend your FSA, 77 things you didn’t know were eligible, sunscreen, thermometers, a fancy massage gun with a doctor’s note. They all assume the FSA use it or lose it rule works the way it did in 2012, when every unspent dollar vanished on December 31. For a lot of plans it doesn’t anymore. If your employer offers a carryover at the IRS maximum, the first $680 of your leftover balance is already safe, and if you’re switching to a high-deductible plan in January, that “safe” $680 can turn into the most expensive money in your account.
So before you add a third bottle of sunscreen to your cart, find out which of three very different rules you’re living under.
Most FSA spend-down advice ignores which of three plans you have
The IRS lets employers pick one escape hatch from use it or lose it, or none at all. A plan can offer a carryover, which rolls a capped amount into next year. It can offer a grace period, which gives you until about March 15 to incur new expenses against this year’s money. Or it can offer neither. The IRS has been explicit since its 2019 guidance on the subject that employers can offer “either option (not both) or no option.”
The carryover cap is the number that matters right now. Under Rev. Proc. 2025-32, the maximum you can roll from a 2026 plan year into 2027 is $680, up from $660 the year before. On November 5, the IRS released its 2027 inflation adjustments, raising the contribution limit to $3,500 and the following year’s carryover to $700.
There’s also a third deadline people confuse with the other two: the run-out period. Bank of America’s health accounts guide explains it plainly. A grace period extends when you can spend. A run-out period, often through March 31, only extends when you can file claims for expenses you already had during the plan year. That’s the deadline that quietly eats money, because the dentist bill you paid in September with a personal card doesn’t count until you submit it.
The average FSA forfeiture is smaller than the panic suggests
The Employee Benefit Research Institute tracks this with real account data, not surveys. Its October 2026 update, covering more than 3.3 million accounts in 2024, found that about 40% of FSA holders forfeited money, down from roughly half in 2023. The average forfeiture among those who lost anything was $404, the lowest since EBRI started its database in 2019. The average contribution was $1,431.
Put those two numbers side by side and the typical forfeiture is $404 out of $1,431, a bit under 30% of what went in. It’s also $276 less than this year’s maximum carryover. In other words, for anyone whose employer offers the full carryover, the average loss would have rolled over untouched. The people with the most at risk are on plans with no carryover at all, plus the youngest workers: EBRI found two thirds of accountholders under 25 forfeited something.
Here’s the math on a $1,100 balance in mid-November
Say you elected $2,000 for 2026, you’ve been reimbursed for $900, and $1,100 is sitting in the account. Your federal bracket is 22%, and FSA money also skips 7.65% in Social Security and Medicare tax, so every FSA dollar saved you 29.65 cents. A forfeited dollar therefore costs you 70.35 cents of take-home pay.
On a carryover plan set at the IRS maximum, $680 rolls into 2027 automatically (your employer can choose a lower cap, so check). Only $420 is at risk. Lose it and you’ve lost $420 × 0.7035, or $295.47 of real money. Spend it on things you’d buy anyway and you’ve saved the full 29.65%. A 5-ounce bottle of La Roche-Posay Anthelios Melt-In Milk SPF 60 runs $37.97 at Walmart, and broad-spectrum sunscreen is FSA eligible. Bought with FSA money, it costs you $26.71 in take-home pay. Bought with your debit card in June, it costs $37.97.
On a grace period plan, nothing is at risk yet. You have until mid-March to book the eye exam or refill the prescription.
On a no-option plan, the whole $1,100 is at risk, which means $773.85 of take-home pay if you do nothing. This is the only scenario where the December shopping list earns its reputation.
Notice what this does to the panic buy. On the carryover plan, spending $1,100 on stockpiled thermometers and first-aid kits converts $680 of money you could have used next year on a real expense into stuff you didn’t need. You’d be trading flexible money for a closet of things you didn’t need.
Switching to an HDHP? The carryover is the trap, not the forfeit
This is the part almost none of the spend-it-now guides mention. If you picked a high-deductible plan during open enrollment so you can fund an HSA in 2027, a leftover balance in a general-purpose health FSA can disqualify you from contributing to the HSA. In its 2014 Chief Counsel Advice memo (CCA 201413005), the IRS said that carryover into a general-purpose FSA blocks HSA eligibility for the entire following plan year. A grace period balance blocks the first three months.
Here’s what that costs. The 2027 HSA limit is $4,500 for self-only coverage under Rev. Proc. 2026-24. Contributed through payroll at the same 29.65% combined rate, that’s $1,334.25 in tax savings. A $680 carryover sitting in the wrong kind of account could cost you about twice its own value in lost HSA benefits.
The same IRS memo describes the fixes. Many plans automatically convert the carryover into a limited-purpose FSA (dental and vision only) when you move to an HDHP, which keeps both the money and your HSA eligibility. Some let you waive the carryover before the new year starts. If you’re switching plans, call your benefits administrator this month and ask exactly which one yours does. If you’re still weighing the switch, our breakdown of HDHP vs PPO worst-case math walks through whether the HSA is worth chasing.
FSA use it or lose it is now a paperwork deadline more than a shopping deadline
Here’s what to do this week, in this order. Log into your FSA portal and find two dates: the last day to incur expenses and the last day to submit claims. Then check whether your plan says “carryover,” “grace period,” or nothing. Then pull every medical, dental, and vision receipt from 2026 and submit the ones you paid out of pocket. Copays, prescriptions, a crown, the contacts you ordered in July. That step alone often wipes out the balance without buying anything new.
If money is still at risk after that, spend it on things you’ll use in the next six months. Over-the-counter medicine and menstrual products have been eligible without a prescription since the 2020 CARES Act, so restocking ibuprofen, tampons, and sunscreen is real savings. A blood pressure cuff for a parent who needs one counts. A fourth heating pad doesn’t.
Then fix next year at the source. EBRI’s numbers say the average person contributes about $1,431. If you forfeited money this year, look at what you claimed and set your 2027 election to that, not to the $3,500 maximum. If you also juggle a dependent care account, remember it runs on different rules entirely, which we unpacked in dependent care FSA vs the child care credit.
The FSA use it or lose it rule still has teeth, but they’re aimed at the dollars above your carryover cap and at claims you forgot to file. Know your plan’s rule, file your receipts, and the shopping list gets a lot shorter.