FSA Changes When You Switch Jobs

Quick answer

• Your FSA funds are generally use-it-or-lose-it and do not transfer to a new employer.
• You typically have a grace period or a run-out period to spend remaining funds after leaving a job.
• If you don’t use the funds by the deadline, you will forfeit them.
• Some employers may offer a COBRA option for certain FSA types, but this is uncommon and costly.
• You cannot typically roll over FSA funds to an IRA or another savings account.
• Be proactive in understanding your former employer’s FSA policies before your departure date.

Who this is for

• Employees who are planning to leave their current job and have a Flexible Spending Account (FSA).
• Individuals who are unsure about the implications of changing jobs on their FSA balances.
• Anyone who wants to maximize their FSA benefits and avoid forfeiting unused funds.

What to check first (before you act)

Your FSA type and balance

Before you do anything else, understand exactly what kind of FSA you have (Health Care FSA or Dependent Care FSA) and how much money is currently in it. This information is crucial for planning how to use the remaining funds.

Your employer’s FSA policies

Each employer has its own specific rules regarding FSA usage after employment termination. This includes deadlines for spending, grace periods, and any run-out periods. You can usually find this information in your employee handbook or by contacting your HR department.

Your termination date and next employer’s benefits

Knowing your last day of employment with your current company is essential for calculating your spending window. Also, research the benefits offered by your potential new employer. Do they offer an FSA? When does eligibility begin? This will help you decide if you need to accelerate spending or if you can spread it out.

Remaining eligible expenses

Consider what eligible expenses you still anticipate needing before your FSA “use-it-or-lose-it” deadline. This could include doctor’s visits, prescriptions, dental care, vision care, or childcare costs. Planning ahead can help you use the funds strategically.

Step-by-step (simple workflow)

1. Confirm your FSA type and balance:

• What to do: Log into your FSA administrator’s portal or contact them directly to get an exact balance and confirm if it’s a Health Care FSA (HCFSA) or Dependent Care FSA (DCFSA).
• What “good” looks like: You have a clear, up-to-date figure of your remaining FSA funds.
• Common mistake: Relying on outdated pay stubs or memory. Avoid it by: Always verifying with the official administrator.

2. Understand your employer’s termination policy:

• What to do: Contact your HR department or review your benefits documentation for specific details on what happens to your FSA upon leaving. Ask about the exact date you must incur expenses by and the deadline for submitting claims.
• What “good” looks like: You know the precise date by which all expenses must be incurred and the deadline for submitting reimbursement claims.
• Common mistake: Assuming the policy is standard across all employers. Avoid it by: Getting your specific employer’s policy in writing or confirmed by HR.

3. Determine your last day of employment:

• What to do: Confirm your official last day of employment with your current company.
• What “good” looks like: You have a definitive date to work with for your FSA spending timeline.
• Common mistake: Underestimating or overestimating your last day, leading to incorrect planning. Avoid it by: Getting a written confirmation of your final work date.

4. Calculate your spending window:

• What to do: Based on your termination date and your employer’s policy (grace period, run-out period), determine the final date by which you must incur eligible expenses and the final date to submit claims.
• What “good” looks like: You have a clear calendar of deadlines for incurring expenses and submitting claims.
• Common mistake: Confusing the date expenses must be incurred versus the date claims must be submitted. Avoid it by: Asking for clarification on both dates from your administrator or HR.

5. Identify remaining eligible expenses:

• What to do: Make a list of potential eligible expenses you anticipate having before your deadline. For HCFSA, this includes medical, dental, vision, and prescription costs. For DCFSA, this includes childcare for dependents under age 13.
• What “good” looks like: You have a practical list of expenses that can be covered by your FSA.
• Common mistake: Forgetting about eligible expenses that are coming up soon. Avoid it by: Thinking about upcoming appointments, regular childcare needs, or even stocking up on FSA-eligible over-the-counter items if allowed.

6. Accelerate or plan for expenses:

• What to do: If you have a significant balance and your deadline is approaching, consider scheduling necessary medical/dental appointments, filling prescriptions, or pre-paying for eligible services if your plan allows. For DCFSA, ensure you can utilize the funds for your dependent care needs.
• What “good” looks like: You are actively using your funds for legitimate expenses before the deadline.
• Common mistake: Waiting too long and then rushing to find expenses, potentially leading to unnecessary purchases. Avoid it by: Starting this process as soon as you know you’re leaving.

7. Submit claims promptly:

• What to do: Gather all receipts and documentation for incurred expenses and submit your reimbursement claims to your FSA administrator before the final claim submission deadline.
• What “good” looks like: All valid claims are submitted well before the deadline, and you receive your reimbursements.
• Common mistake: Missing the claim submission deadline, even if expenses were incurred on time. Avoid it by: Submitting claims as soon as possible after incurring an expense, or at least with ample time before the final deadline.

8. Check new employer’s benefits:

• What to do: If your new employer offers an FSA, understand their enrollment periods and eligibility start dates.
• What “good” looks like: You are prepared to enroll in your new FSA if desired, without gaps in coverage if you have ongoing medical needs.
• Common mistake: Assuming you can enroll in an FSA immediately upon starting a new job. Avoid it by: Knowing that FSA enrollment is typically tied to specific enrollment periods or qualifying life events.

Common mistakes (and what happens if you ignore them)

Mistake	What it causes	Fix
Forgetting to check FSA type and balance	Inaccurate planning, potential forfeiture of funds.	Always verify your exact balance and type (HCFSA/DCFSA) with the administrator.
Assuming FSA funds transfer	Complete loss of unused funds, as they are tied to the employer.	Understand that FSA funds do not transfer; they must be used by the deadline or are forfeited.
Missing the expense incurrence deadline	Inability to use funds for expenses that arise after this date.	Clearly identify the date by which all eligible expenses must be incurred.
Missing the claim submission deadline	Inability to get reimbursed for incurred expenses, even if they were eligible.	Note the final date for submitting all reimbursement claims and submit them well in advance.
Not understanding the “use-it-or-lose-it” rule	Forfeiting all remaining funds, regardless of need.	Recognize that FSA funds are tied to a plan year and must be used within that period or a defined grace/run-out period.
Not planning for eligible expenses	Scrambling to find expenses at the last minute, leading to poor decisions.	Proactively list potential eligible expenses you anticipate needing and schedule them if possible.
Not inquiring about grace/run-out periods	Miscalculating the actual time you have to spend funds or submit claims.	Ask your HR or FSA administrator for explicit details on any grace period (extra time to incur expenses) or run-out period (extra time to submit claims).
Not checking new employer’s benefits	Missing enrollment windows for a new FSA or other benefits at the next job.	Research your new employer’s benefits package, including FSA options and enrollment periods, as soon as possible.
Spending on ineligible items	Claims being denied, requiring you to pay out-of-pocket, and potentially losing FSA funds.	Review the IRS guidelines and your FSA administrator’s list of eligible expenses carefully. Keep receipts for all claims.
Not keeping good records	Difficulty in submitting claims or proving expenses if audited.	Maintain organized records of all receipts and documentation related to FSA-eligible expenses.

Decision rules (simple if/then)

• If you have a Health Care FSA (HCFSA) and are leaving your job, then plan to use the remaining funds for medical, dental, vision, or prescription expenses before your termination date’s deadline because FSA funds do not transfer.
• If your employer offers a grace period for your FSA, then you have additional time after your termination date to incur eligible expenses, but you must still adhere to the claim submission deadline.
• If you have a Dependent Care FSA (DCFSA) and are leaving your job, then prioritize using the funds for childcare expenses for dependents under 13 before your deadline because these funds are also use-it-or-lose-it.
• If your FSA balance is substantial and your departure date is near, then consider scheduling anticipated medical appointments or filling necessary prescriptions now because you risk forfeiting the money if unused.
• If you are unsure about what constitutes an eligible expense, then consult your FSA administrator’s guidelines or the IRS website because spending on ineligible items will result in denied claims.
• If your new employer offers an FSA, then investigate their enrollment period and eligibility requirements early because missing the enrollment window means you may have to wait until the next open enrollment period.
• If you have a large FSA balance and are struggling to find eligible expenses, then consider purchasing FSA-eligible over-the-counter items like bandages, pain relievers, or first-aid supplies if your plan allows, as long as you have receipts.
• If your employer has a run-out period, then understand that this is the time you have after the expense incurrence deadline to submit your claims for reimbursement.
• If you are considering COBRA for your FSA, then be aware that this is rarely offered for FSAs and is typically very expensive, as you would pay the full premium yourself.
• If your termination date is within a few months of the end of your current FSA plan year, then you may have a very short window to use your funds, requiring immediate action.

FAQ

Q: Can I roll over my FSA funds to my new employer’s FSA?

A: No, FSA funds are tied to the employer who sponsored the plan and cannot be rolled over to a new employer’s FSA.

Q: What happens if I don’t use all my FSA money before I leave my job?

A: Generally, you will forfeit any remaining balance. However, your employer’s plan may include a grace period or a run-out period to spend funds or submit claims.

Q: Can I get a refund for the money I contributed to my FSA?

A: No, FSA contributions are typically deducted from your pay pre-tax, and the money is considered spent when it’s used for eligible expenses within the plan year. You cannot get a direct refund of unused contributions.

Q: How long do I have to submit claims after I leave my job?

A: This depends on your employer’s plan. You’ll have a specific deadline to incur expenses and another deadline to submit claims. Always confirm these dates with your HR department or FSA administrator.

Q: Can I use my FSA funds for expenses incurred after my last day of employment?

A: Typically, no, unless your employer specifically offers a grace period that extends the time to incur expenses. Expenses must usually be incurred while you are employed or within the defined grace period.

Q: What if I have an upcoming surgery scheduled after I leave my job?

A: If the surgery is scheduled after your last day and your employer doesn’t offer a grace period for incurring expenses, you likely cannot use your current FSA for it. You would need to rely on your new employer’s benefits or other insurance.

Q: Can I use my FSA money to pay for my COBRA premiums?

A: Health Care FSA funds can sometimes be used to pay for COBRA premiums if your former employer’s plan allows it, but this is not always the case and you should verify with your administrator.

Q: What is the difference between a grace period and a run-out period?

A: A grace period allows you additional time after your plan year ends (or after your employment ends) to incur eligible expenses. A run-out period allows you additional time after the plan year ends (or after your employment ends) to submit claims for expenses incurred during the plan year.

What this page does NOT cover (and where to go next)

• Specific IRS contribution limits for FSAs (these change annually).
• Detailed explanations of eligible expenses for every possible scenario.
• How to appeal a denied FSA claim.
• Information on Health Savings Accounts (HSAs), which have different rules regarding rollovers and portability.
• Navigating COBRA health insurance enrollment and costs.
• Strategies for maximizing FSA benefits during your entire employment period, not just at job transition.