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Mastering FSA Rollover and Carryover Rules: Maximize Your Healthcare Savings

Getting the most out of your flexible spending account (FSA) requires a good understanding of the rules and options available. FSA rollover rules and FSA carryover rules are key factors to consider when managing your healthcare expenses.

In this article, we will explore these rules, including partial rollovers, grace periods, maximum contributions, and rollover options.Managing healthcare expenses can be challenging, especially when unexpected medical bills arise. This is where flexible spending accounts (FSAs) can come in handy, providing a way to save pre-tax money to cover these expenses.

Understanding the rules and options associated with FSAs can help you make the most of this valuable financial tool.

1) FSA Rollover Rules

A) Partial FSA Rollover

If you have money left in your FSA at the end of the year, you may be concerned about losing it. However, the good news is that the IRS implemented a rule in 2013 allowing employers to offer a limited rollover option.

This means that a portion of your unused funds can be carried over to the next plan year, rather than being forfeited. It provides a safety net and encourages participants to use as much of their FSA funds as possible without the fear of losing everything.

B) 2-Month Grace Period

In addition to partial rollovers, some employers offer a grace period of up to two months after the end of the plan year. During this grace period, you can still use the remaining funds from the previous year’s FSA to cover eligible healthcare expenses.

This extension can be a lifesaver if you have unexpected medical costs that arise just after the plan year ends. It allows you to use your old FSA funds before turning to your new contributions.

2) FSA Carryover Rules in 2020 and 2021

A) Maximum FSA Contribution

Each year, the IRS sets a maximum limit for FSA contributions. In 2020 and 2021, this maximum limit is $2,750.

It’s essential to be aware of this limit to avoid overcontributing to your FSA. Overcontributing can result in penalties or the loss of tax advantages.

B) Rollover Option and Spending

Some FSAs offer the option to rollover a certain amount of unused funds to the next plan year. However, it’s important to note that the rollover amount is usually limited.

In 2020 and 2021, the maximum rollover amount is $550. This means that only up to $550 of your unused funds can be carried forward, while the rest of the remaining balance is forfeited.

It’s crucial to plan your expenses accordingly to maximize the rollover option, thereby avoiding losing a significant portion of your FSA funds.


Understanding the FSA rollover rules and FSA carryover rules can help you optimize your healthcare expenses. By taking advantage of partial rollovers, grace periods, and appropriate spending, you can ensure that your hard-earned FSA funds are used effectively.

Remember to stay informed about the maximum contribution limits and rollover amounts for each plan year, and plan your expenses accordingly. By doing so, you can make the most of your FSA and alleviate the financial burden of healthcare expenses.

3) Sample Scenarios

A) Full Rollover Allowed

Imagine you have diligently contributed to your FSA throughout the year, but unexpected circumstances prevented you from utilizing the funds. In some cases, employers allow for a full rollover of your unused FSA balance, which can be a significant relief.

This means that you don’t have to worry about losing any hard-earned money and can start the new plan year with the full amount you deposited. So, what does this mean for your finances?

Let’s say you deposited $2,000 into your FSA for the previous plan year, but only spent $1,000 on eligible healthcare expenses. In this scenario, if your employer allows for a full rollover, the remaining $1,000 will be carried over into the next plan year.

This provides you with an immediate head start in covering your healthcare costs without any fear of losing a single dollar. With the option of a full rollover, you have the freedom to plan your healthcare expenses strategically.

You may choose to use your FSA funds for routine check-ups, prescription medications, and preventive care, knowing that any unspent funds will be carried over. This flexibility can alleviate some of the financial stress associated with healthcare expenses and enable you to make more informed decisions about your medical needs.

B) Partial Rollover Allowed

Not all employers offer the option of a full rollover, but many provide an alternative – the partial rollover. This option allows a portion of your unused FSA funds to carry over into the next plan year, offering some protection against losing all of your deposited funds.

Let’s consider a scenario where you have $2,000 in your FSA for the previous plan year, but you’ve only spent $1,000. If your employer allows for a partial rollover, a predetermined percentage or a fixed amount of the remaining $1,000 can be carried forward.

For example, if the percentage is set at 50%, then $500 will be rolled over, and $500 will be forfeited. This means you start the new plan year with $500 already available for your healthcare needs.

A partial rollover can provide a good balance between the full protection of a full rollover and the stricter rule of no rollovers. It allows you to benefit from unused funds while still encouraging responsible spending.

With this option, it’s essential to carefully plan your expenses to maximize your rollover amount. Take into account upcoming medical appointments, prescription refills, and other eligible healthcare expenses to make the most of your FSA funds.

C) No Rollover Allowed

In some cases, employers do not offer any rollover options. This means that any unspent FSA funds at the end of the plan year are forfeited.

It’s crucial to familiarize yourself with your employer’s FSA plan rules to avoid losing money unnecessarily. Consider a scenario where you’ve contributed $2,000 to your FSA for the previous plan year but have only spent $1,000 on eligible expenses.

If no rollovers are allowed, the remaining $1,000 will be lost to you. It’s undoubtedly disappointing to lose funds that you’ve set aside specifically for healthcare expenses, but it serves as a reminder to carefully plan and budget your FSA contributions.

When no rollover option is available, you’ll want to avoid overcontributing to your FSA. Take the time to estimate your healthcare expenses for the plan year and contribute an amount that aligns with your needs.

This way, you can maximize the benefits of pre-tax contributions without risking losing a significant portion of your hard-earned funds.


Understanding the various scenarios surrounding FSA rollovers allows you to make informed decisions about your healthcare expenses. Full rollovers offer the security of carrying over all unused funds, while partial rollovers strike a balance between preservation and responsible spending.

Alternatively, when no rollovers are allowed, it’s crucial to carefully plan your contributions and expenses. By evaluating your employer’s FSA plan rules, you can determine the best approach to maximize the benefits your FSA provides.

Whether you’re fortunate enough to have a full rollover, a partial rollover, or no rollover at all, the key is to plan strategically and use your FSA funds wisely. By doing so, you can ease the burden of healthcare expenses and make the most of this valuable financial tool.

In conclusion, understanding the rules and options associated with FSA rollovers and carryovers is crucial for maximizing the benefits of your flexible spending account. Whether your employer allows for full rollovers, partial rollovers, or no rollovers at all, careful planning and strategic spending can help you make the most of your FSA funds.

By familiarizing yourself with the specific guidelines of your employer’s FSA plan, you can ensure that you don’t leave money on the table and alleviate the financial burden of healthcare expenses. Take advantage of any rollover options available to you, and remember to plan your contributions and expenses wisely.

Your FSA can be a valuable tool in managing your healthcare costs, so make sure to use it effectively and optimize your financial well-being.

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