Health flexible spending accounts allow workers to set aside pretax income for eligible medical expenses, but unspent balances are typically forfeited at year’s end. According to research from the Employee Benefit Research Institute examining over 3.3 million accounts in 2024, approximately 4 in 10 FSA holders lost unused funds, with an average forfeiture of $404. This represented a decline from the $436 average forfeiture recorded in 2023.
Despite these forfeitures, workers may still gain a financial advantage by participating in FSAs. The tax savings from contributing pretax dollars can exceed the amount forfeited if the contribution is large enough. For instance, a worker contributing the maximum $3,400 in 2026 with a combined tax rate of 35% would save approximately $1,190 in taxes, meaning losses under that threshold still result in a net benefit.
Access to health FSAs has expanded, with 72% of state and local government workers and 47% of private-sector workers having access as of 2026, compared with 68% and 40% respectively in 2017. Not all plans operate under strict use-it-or-lose-it rules; roughly two-thirds of FSA users can either carry over up to $680 into the next year or use a grace period of up to 2.5 months to incur additional expenses.
Workers face challenges in projecting annual healthcare spending before the plan year begins, particularly those in good health without chronic conditions. Experts recommend reviewing anticipated expenses, including recurring prescriptions, doctor visits, copays, dental and vision care, and eligible over-the-counter items. Many FSA-eligible expenses surprise consumers, including certain over-the-counter medications, menstrual products, sunscreen, first-aid supplies, and health-monitoring devices. The maximum FSA contribution for 2026 is $3,400, increasing to $3,500 in 2027.
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