Some workers with health flexible spending accounts may be on the verge of giving their employers an unintentional gift this holiday season.
Each year, the share of employees who miss the typical Dec. 31 deadline to spend their FSA money and end up forfeiting it to their companies is between 40% and 50%, according to ongoing research from the Employee Benefit Research Institute, which began tracking FSA data in 2019. Although some companies give account holders an extension, most — about two-thirds — employ a use-it-or-lose-it rule.
“People tell us one of the main reasons they forfeit FSA funds is because they aren’t aware that they have a deadline in the first place, or they don’t know how much they have left in their account,” said Rachel Rouleau, chief compliance officer for Health E-Commerce, parent company of FSA Store.
The total U.S. health-care expenditure was $4.9 trillion in 2023, according to the most recent data available from the Centers for Medicare & Medicaid Services. Out-of-pocket spending that year grew 7.2% to $505.7 billion.
As health-care costs have risen over the years — at a rate outpacing overall inflation — FSAs have grown in popularity as a way for workers to set aside pretax money to cover health expenses. Nearly three-quarters — 72% — of state and local government workers and 47% of private-sector workers had access to a health FSA in 2024, according to the Bureau of Labor Statistics. That compares with 60% and 40% in 2015, respectively.
