FSA Holders Lose Millions in Unused Benefits
About 40% of account holders lost an average of $404 in 2024, highlighting the need to spend down funds by year-end.
Updated on Oct. 27, 2026 in Saving
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Research from the Employee Benefit Research Institute indicates that 40% of flexible spending account (FSA) holders forfeited unused funds in 2024. As the IRS sets the maximum annual contribution at $3,400 for 2026, workers should review their plan rules to avoid losing money at year-end.
Why it matters
The use-it-or-lose-it rule means unspent FSA balances often disappear at the end of the year, directly impacting household budgets. Understanding these contribution limits and potential for forfeiture is essential for planning medical expenses and maximizing tax-advantaged savings.
In 2024, 40% of FSA participants forfeited an average of $404 each. With the IRS raising the 2026 maximum contribution to $3,400, managing these accounts requires careful tracking of balances.
The players
Employee Benefit Research Institute
A nonpartisan research organization that conducts studies on employee benefit programs and retirement savings.
Internal Revenue Service
The federal agency that establishes annual contribution limits and tax regulations for health spending accounts.
The details
Flexible spending accounts require participants to use funds for eligible healthcare costs within the plan year or risk losing the balance. Employers may mitigate this by providing a grace period or allowing up to $680 to carry over into 2026, but these features are not mandatory. Workers can use online account filters to identify eligible products to spend down remaining balances before their specific plan deadline arrives.
Timeline
2019: The Employee Benefit Research Institute began tracking flexible spending account data.
2023: The average forfeited FSA amount was $436.
2024: 40% of FSA holders surrendered unused funds.
2026: The IRS maximum annual FSA contribution reaches $3,400 and the carryover limit increases to $680.
Money Landscape
The use-it-or-lose-it rule remains a central feature of the IRS tax-advantaged savings landscape for healthcare. Even as maximum contributions increase for 2026, the potential for forfeiture continues to affect nearly half of all account holders.
Review your plan documents to confirm if your employer offers a grace period or a carryover option for unused funds. If your plan does not allow either, consider scheduling necessary healthcare services or purchasing eligible supplies before the end of your plan year.
The takeaway
FSA forfeiture remains common, with 66% of workers under 25 losing funds in 2024. Regularly monitor your account balance and discuss eligible expense categories with a tax professional to ensure you utilize your set-aside funds effectively before they expire.
Further reading
For tips on managing your medical expenses and tax-advantaged accounts, visit Saving.
Source note: This article includes information reported by Idaho Statesman.
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Is it worth using a flexible spending account if you risk losing your unspent year-end balance?
