Flexible Spending Accounts: Grace Period vs. Run-Out

There are a few key things to know about your Flexible Spending Account (FSA) and what happens to your funds at the end of your plan year. First, you’re going to want to spend all the money in your account before your year-end deadline hits. If you don’t spend it, you risk losing any remaining funds (in fact, they’ll likely be forfeited back to your employer). Second — and here’s the good news — if you’ve missed your deadline and still have funds in your account, you may have options.

Many FSA plans offer a 2.5 month grace period and/or a run-out period. These options give you more time to use the money in your FSA, or get reimbursed for expenses incurred during your previous plan year.

So, what's the difference between the two?

• If your FSA plan offers a grace period, you have up to two-and-a-half months at the end of your plan year to spend unused FSA funds and incur new FSA eligible expenses. Any money that's leftover at the end of the grace period is forfeited due to the “Use it or Lose it" rule. You cannot cash out any remaining FSA funds, as money can only be used for FSA eligible expenses. For example: If you had a December 31 FSA year deadline, your grace period would allow you to use your 2024 FSA funds through March 15, 2025. A grace period is optional (meaning not all employers offer it), and the specific deadline also depends on when your plan year ended.
• If your FSA plan has a run-out period, you have an extended time at the end of the FSA plan year to submit receipts for reimbursement. You can only get reimbursed for claims incurred during the previous FSA plan year. The run-out period is usually 90 days after the plan year ends. For example: If your FSA plan year ended on December 31, 2024, the run-out period ends on March 31, 2025. The run-out period is also optional, and its deadline date is determined by when your plan year ended.

Chances are you have either a grace period or a run-out or both, but because these are optional, it's best to check in with your FSA administrator. If you aren't sure who your FSA administrator is, you should consult your company's HR department to find out.

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