FSA Rollover vs. Grace Period: What Happens to Your Unused Money at Year-End?

Short answer: whether your leftover FSA money disappears on January 1 depends on one line in your plan document — a "rollover" (also called a carryover) lets you carry up to $680 into 2027, while a "grace period" gives you an extra 2½ months to spend the full balance, but you can't have both.

Every fall, the same panic email lands in inboxes: "Your FSA balance will be forfeited if not used by..." and then a date that never quite makes sense. Part of the confusion is that "rollover" and "grace period" get used interchangeably when they're actually two different rules, and your employer only picked one (or neither). Here's how to figure out which one applies to you, and what to do with what's left.

What's the difference between an FSA grace period and a rollover?

A rollover (carryover) lets a set dollar amount of unused funds move into the next plan year, with no deadline to spend it beyond that. A grace period doesn't move money anywhere — it just extends your spending window by up to 2½ months past the end of your plan year, after which anything unspent is forfeited. The IRS allows employers to offer one of these two options, or neither, but never both in the same plan.

How much FSA money can carry over to 2027?

For plans that allow a carryover, the IRS cap for amounts rolling from 2026 into 2027 is $680, up from $660 the year before. That's the maximum the IRS permits — your employer's plan document sets the actual number, and some employers choose a lower cap or round it down. The good news: money you carry over doesn't count against your new plan-year contribution limit — it's added on top of whatever you elect for the new year, not subtracted from it.

What if my plan has a grace period instead?

Then there's no cap on the amount, but there is a hard stop on time. You typically get until mid-March of the following year to incur new eligible expenses using your prior year's balance — but check your specific plan, since employers set the exact grace period length up to that 2½-month IRS maximum. Anything not spent (not just submitted for reimbursement, but actually incurred) by that date is gone.

What if my employer offers neither?

That's the true "use it or lose it" scenario: your plan year end date is your hard deadline, full stop. If that's you, treat the last few weeks of your plan year like a countdown — check your balance through your FSA administrator's portal and plan a purchase before the calendar flips.

Does my HSA work the same way?

No, and this is one of the more reassuring differences between the two accounts. An HSA has no rollover cap and no grace period requirement because the entire balance is yours permanently — it simply carries forward every year, even if you change jobs or retire. If you're not sure which account you have, this breakdown of FSA, HSA, LPFSA, and HRA rules can help you tell them apart before you make a purchase.

How do I find out which one my plan has?

Your Summary Plan Description (SPD) will say explicitly, and most FSA administrator portals list it on the account overview page. If you can't find it, ask HR directly — "does our FSA have a carryover or a grace period" is a completely normal question, and getting a clear answer now beats guessing in December.

What's the smartest way to use leftover FSA money before it disappears?

Once you know your real deadline, the goal is spending on something you'll actually use — not just anything that scans as eligible. Red light therapy devices are a common choice because they're FSA/HSA eligible, ship quickly, and address specific, ongoing needs rather than sitting in a drawer. A few ways people size the purchase to their remaining balance:

• Small leftover balance (under $150): the 3-in-1 Torch ($84.99) or the Red Light Therapy Belt ($119.99) both fit within a typical rollover balance.
• Mid-size balance: the FX300 panel ($199.99) or the handheld device ($199.99) cover a targeted area for daily use.
• Larger balance: the FX500 full-body panel ($269.99) or an infrared sauna blanket put a bigger balance to use in one purchase.

Not sure which type of device fits your goals? The device finder quiz walks through a few questions and points you to the right one.

It's worth saying plainly: red light therapy isn't a cure for anything, and it won't replace care from your doctor. What the research does support is a real, mechanistic reason people reach for it. A recent systematic review of photobiomodulation therapy for musculoskeletal pain — covering roughly 2,800 patients across knee osteoarthritis, tendinopathy, and low back pain — reported average pain score reductions of around 32% when used as an adjunct to standard care. That's the kind of "worth trying while my FSA dollars are sitting there anyway" case many people are making.

Frequently asked questions

Can I have both a rollover and a grace period on the same FSA?

No. IRS rules only allow an employer to offer one or the other for health FSAs, never both in the same plan year.

Does unused rollover money expire eventually?

Rolled-over funds become part of your new plan year's balance and follow that year's rules going forward — they don't get a second, separate deadline, but they're still subject to whatever rollover or grace rule applies at the end of the next year too.

What happens to money above the rollover cap?

Anything above your plan's rollover limit (up to the IRS max of $680 for 2026 plans) is forfeited at your plan year's end, unless your plan also has a grace period — which, as noted above, it can't if it already has a rollover.

Is a Dependent Care FSA treated the same way?

No. Dependent Care FSAs are strictly use-it-or-lose-it under IRS rules, with no rollover option, regardless of what your Healthcare FSA offers.

Can I still buy something after my plan year ends if I have a grace period?

Yes, as long as you incur the expense (not just submit the paperwork) within your plan's grace period window, typically up to 2½ months after year-end.

Where do I check my exact deadline and balance?

Log into your FSA administrator's portal or check your Summary Plan Description — both should state your plan's specific carryover amount or grace period date.

Lights on, pain off.

This article is for general education and is not medical advice. Red light therapy devices are intended for general wellness and are not intended to diagnose, treat, cure, or prevent any disease. Always check with a qualified healthcare provider before starting a new therapy.