About 4 in 10 workers with health FSAs forfeited unused money in 2024, according to an October report from the Employee Benefit Research Institute. Among those account holders, the average forfeiture was $404, down from $436 in 2023. The research examined more than 3.3 million accounts representing $3.9 billion in contributions.
Workers who lose FSA funds may still benefit from participating in the account if their forfeiture is less than the tax savings they realized. FSA contributions avoid federal taxes, payroll taxes (FICA) that go toward Social Security and Medicare, and may avoid state and local taxes depending on location. A worker contributing the 2026 maximum of $3,400 with a combined tax rate of 35% would realize approximately $1,190 in tax savings.
Nearly three-quarters of state and local government workers and 47% of private-sector workers have access to a health FSA in 2026, according to the Bureau of Labor Statistics. That compares with 68% and 40%, respectively, in 2017.
Roughly a third of FSA users face a strict use-it-or-lose-it provision. The rest either can carry over up to $680 into the following year or receive a grace period of up to 2.5 months after the deadline to incur additional expenses. Employers cannot offer both options.
For 2027, the IRS announced Thursday that the maximum FSA contribution will be $3,500, up from $3,400 in 2026.
Over-the-counter medications, menstrual care products, sunscreen, first-aid supplies and certain health-monitoring devices are FSA-eligible, as are doctor and dentist appointments, prescription drugs, acupuncture and addiction treatment.