Grace Period

Having an FSA grace period is sort of like getting an extension on a final paper in college in that it gives you more time to use the funds from your prior plan year. Up to another 2.5 months beyond your plan-year deadline. So, if your plan-year deadline was December 31, you would have up until March 15 of the following year to spend your dollars.

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Now, this part is important – and it answers the question we hear most often:

No, you do not automatically have a grace period. And if you do have one, it might not be for the full 2.5 months allowed by the IRS. Plans aren't required to have a grace period, and it's entirely up to your employer to decide if you get one and how long it lasts.

If your employer has opted out of the grace period, you may have the rollover benefit. But again, it's up to them, so now might be a good time to send cookies or give a nice pat-on-the-back for excellent employer-ing.

Unfortunately, only one of these options can be used (no double dipping!). But an employer isn't required to allow one. So, be sure to ask your FSA administrator about your specific plan terms so you can properly budget your spending throughout the year.

Next, we'll discuss the FSA rollover extension, which is something different entirely - let's see how.