What Happens to Your Unused FSA Dollars?

Flexible spending accounts (FSAs) are great for expenses like prescription drugs, eyeglasses, and doctor's appointments. However, when individuals do not use all their funds, they typically lose their remaining account balances.

So where does all of that unused money ultimately go? More often than not, it goes straight to the employer to pay for very specific expenses that the IRS stipulates, like the FSA plan's administrative costs.

Unfortunately, a surprising number of Americans with an FSA ultimately do not spend down their balances. The Employee Benefit Research Institute's FSA database claims that 44% of those with FSAs leave money behind, with an average balance of $370.

While some plans offer an extension, it is essential that employees fully understand all deadlines. Additionally, because employees decide how much they want to contribute each year, it is important to reevaluate this dollar amount annually and adjust it based on changing needs. Even if money is left on the table, however, those with small balances may still benefit financially from the savings from the tax-free account.