A significant portion of health flexible spending account holders lose unused funds each year, according to research from the Employee Benefit Research Institute. The organization’s October report examined more than 3.3 million accounts and found that approximately 4 in 10 FSA account holders forfeited money in 2024, with an average forfeiture of $404 per account, down slightly from $436 in 2023.
Despite these forfeitures, workers may still come out financially ahead by participating in FSAs compared to paying for healthcare expenses with after-tax dollars. The tax advantage comes from the fact that FSA contributions avoid federal income taxes, payroll taxes that fund Social Security and Medicare, and potentially state and local taxes. According to financial experts, workers can calculate their tax savings by adding up their combined federal, payroll, state and local tax rates and applying that percentage to their FSA contribution. If the amount forfeited is less than the total tax savings realized, participants still benefit overall from the arrangement.
Access to health FSAs has expanded in recent years, with 72% of state and local government workers and 47% of private-sector workers having access in 2026, compared to 68% and 40% respectively in 2017. The maximum contribution allowed to health FSAs for 2026 is $3,400, increasing to $3,500 in 2027. However, FSAs operate under a use-it-or-lose-it structure, though roughly two-thirds of FSA users have provisions allowing them to carry over up to $680 into the next year or access grace periods of up to 2.5 months after the deadline to incur expenses.
Experts recommend workers review their anticipated healthcare expenses when deciding how much to contribute, as predicting annual health spending remains a significant challenge, particularly for those without chronic conditions or predictable medication needs. Additionally, workers should be aware that numerous over-the-counter items qualify as FSA-eligible expenses, including certain medications, menstrual care products, sunscreen, and health-monitoring devices, alongside traditional medical services. Most FSA plans offer online portals where participants can check their account balance and verify plan-specific spending deadlines.
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