What is an FSA rollover?
FSA plans are required to operate with a “Use-it-or-Lose-it” rule. Originally, this applied to all FSA funds. However, the regulatory authorities amended the original Use-it-or-Lose-it rule to allow some funds to roll over at the end of the plan year.
Rollover Example
For example, if you elected to contribute $3,000 this year, but only spent $2,700, you could carry over the remaining $300 to use next year. Keep in mind, if you only spent $2,000, you could only carry over the maximum allowed by the IRS (see table here). You would still forfeit any unspent funds over the IRS rollover limit.
Does my plan allow for a rollover?
The rollover feature is only available on some Health FSA accounts. Please refer to your Plan Fact Sheet to confirm if your Health FSA plan allows for a rollover, and if so, review your plan’s specific rollover provisions.
Rollover Timing
Rollovers can only be processed for the prior year after the Claims Submission Deadline has passed. This is because time must be allowed for all claims from the prior plan year to be processed before confirming any remaining amount to roll over. Rollover processing typically occurs approximately one month after the Claims Submission Deadline, between April 15th and May 1st for employers with a calendar year plan year. Once the rollover is processed, those funds will be added to your balance for the current plan year.
Do Rolled over balances roll over again?
It depends on how much you have left in your account and whether you elect to participate in the health FSA in the following plan year.
If your balance at the end of the Claims Submission Deadline is $50 or more, those funds will roll over to the new plan year, regardless of whether you made a health FSA election in the following year.
If your balance at the end of the Claims Submission Deadline is less than $50, the balance will only roll over if you made a health FSA election in the following plan year. If you did not make an FSA election, any balance less than $50 will be forfeited.
Grace Period
The rollover feature is not compatible with the grace period feature for FSAs. Therefore, your plan would not have both.