Millions of Americans Risk Losing Unused Healthcare Funds Before the End of 2026—Here's How to Keep Your Money

Millions of Americans with flexible spending accounts (FSAs) could lose hundreds of dollars in unused healthcare funds if they miss their employer's deadline. Research from the Employee Benefit Research Institute (EBRI) found that about four in 10 FSA holders forfeited money in 2024, losing an average of $404.

With the end of 2026 approaching, workers should check their remaining balances before their plan's deadline passes. The research documents forfeitures in 2024, rather than losses recorded this year, but it highlights the financial risk for participants who leave eligible healthcare funds unused. Not every FSA follows a 31 December deadline. The applicable date depends on the employer's plan, and some accounts offer limited flexibility for unused funds.

Why Millions Risk Losing Unused Healthcare Funds

FSAs allow employees to set aside money from their pay before tax to cover eligible healthcare expenses. Contributions can reduce taxable income, while qualifying reimbursements are generally tax-free. These accounts typically operate under a use-it-or-lose-it system. Unless an employer's plan includes an eligible carryover or grace period, unused funds may be forfeited after the applicable deadline. EBRI's report, Updates From EBRI's Flexible Spending Account Database, 2024, examined more than 3.3 million accounts containing over $3.9 billion in contributions.

The average forfeiture among account holders who lost money fell from $436 in 2023 to $404 in 2024. EBRI also reported that 89% of account holders took a distribution during 2024, receiving an average of $1,503. These distributions show that most account holders accessed their funds, but they do not establish whether participants spent their entire balances.

Younger Workers Face a Greater Risk

Younger account holders were more likely to forfeit unused funds than older participants, according to EBRI. Approximately two-thirds of FSA holders under 25 forfeited some money in 2024, compared with 36% of those aged 65 and older. Contribution levels also differed between age groups. Workers under 25 contributed an average of $623, while those aged 45 to 54 contributed $1,639.

The figures highlight the importance of estimating eligible healthcare expenses before choosing an FSA contribution. However, the statistics alone do not establish why younger participants were more likely to forfeit money. Jake Spiegel, EBRI's senior research associate for health and wealth, said FSAs could help workers stretch their healthcare dollars, but understanding how to use the accounts was essential to maximising their value.

Check Your FSA Deadline and Plan Rules

Workers should confirm when their employer's plan year ends and whether unused funds can remain available after that date. Although many plans follow the calendar year, others use different schedules.

Some employers allow a limited carryover of unused funds into the following plan year. Others offer a grace period of up to two and a half months after the plan year ends, during which eligible expenses may be incurred. Under the standard rules for health FSAs, employers generally cannot offer both options. Neither is mandatory, so workers should check their plan documents rather than assume unused funds will remain available in January.

The deadline for incurring an eligible expense may differ from the deadline for submitting a reimbursement claim. Employees should check both dates with their human resources department or benefits administrator.

Which Healthcare Expenses Qualify?

Workers with remaining funds should prioritise healthcare expenses they genuinely need and confirm that their plans permit reimbursement. Eligible expenses may include prescription medicines, medical appointments, dental treatment, vision care, and certain healthcare products. Eligibility depends on the expense and applicable rules, and some purchases require supporting documentation.

Account holders should consult their plan's approved-expense list before making purchases. They should also retain receipts and submit reimbursement claims within the required period. Using remaining funds for legitimate healthcare needs is preferable to buying unnecessary products simply to avoid forfeiting money.

What Workers Should Do Before 2026 Ends

Workers should review their balances, confirm their applicable deadlines, and establish whether a carryover or grace period applies. They should then identify eligible expenses and submit outstanding claims on time. Those choosing contributions for 2027 should estimate their likely eligible healthcare costs rather than automatically repeating their previous election. Planned dental work, prescription expenses, medical appointments, and vision care may help inform that decision.

Forfeiting some money does not necessarily mean an FSA participant has lost money overall. EBRI has noted that tax savings from participation may exceed the amount forfeited, depending on individual circumstances. Understanding the plan's rules and acting before the applicable deadline can help workers make better use of the healthcare funds they have already set aside.