What Do I Do With My FSA If I'm Changing Jobs?

If you have a Flexible Spending Account (FSA) and you're about to leave your job—or you've recently left—you may be unsure what happens to your FSA funds. Unlike a Health Savings Account (HSA), an FSA is employer-owned, which can make the process less straightforward. Below is a guide to help you understand your options and the potential steps you can take.

1. Understand FSA Basics

• Employer-Owned: Your employer sets up the FSA, and if you leave, you typically lose access to any remaining funds unless specific allowances apply (like COBRA continuation or a grace period).

• Use It or Lose It Rule: Most FSAs have a plan-year deadline for spending funds, plus a possible grace period or a small allowed carryover. If you don't use the funds during that timeframe, you generally forfeit them.

To learn more, consult the IRS's Publication 969 for details on various tax-favored health plans (including FSAs) and Publication 502 for eligible medical expenses.

2. Check Your Plan's Specific Rules

Before you leave your job, review your FSA plan documents or talk to your HR department or benefits administrator. Key questions to ask:

• Is there a Grace Period? Some plans give you extra time (e.g., 2½ months) after the plan year ends to incur new expenses.

• Is there a Carryover? Some plans allow you to roll over a small amount (e.g., $610 for 2023–2024 plans, subject to change) into the next year.

• Run-Out Period for Claims: Even if you can't incur new expenses after your termination date, you may have a window (often 90 days) to submit reimbursement claims for expenses incurred before you left.

3. Spend Any Remaining Funds Before Leaving

If your FSA plan year or grace period won't continue much beyond your last day, it's often best to use your FSA funds before you go:

• Schedule Doctor, Dental, or Vision Appointments while you're still employed.

• Stock Up on Eligible Over-the-Counter (OTC) Items, such as bandages, pain relievers, and allergy medications (if covered by your FSA).

Keep in mind that any expenses must be incurred before your coverage ends to qualify for reimbursement. Always keep receipts and verify eligibility via official IRS guidelines or your plan's documentation.

4. Consider COBRA Continuation

If your employer is subject to COBRA regulations, you may have the option to continue your FSA through COBRA, paying the monthly premiums yourself (usually your contribution plus any employer-paid portion, plus a small administrative fee). This can be beneficial if:

• You have a significant FSA balance, and

• You know you'll incur qualified medical expenses soon.

However, COBRA can be pricey. Carefully weigh whether the cost of COBRA premiums outweighs the potential FSA savings.

5. Submit Final Claims Promptly

Even if you can't incur new expenses after your last day of employment, you may still submit claims for expenses incurred while you were covered, typically within a “run-out period.” To avoid losing any eligible funds:

• Check the Submission Deadline: Mark your calendar to ensure you submit all claims on time.

• Keep Documentation Handy: Save invoices, receipts, and insurance statements in case the plan administrator requests more information.

6. What If You Have a Carryover?

If your plan allows a carryover (e.g., up to $610) and you remain in the same plan through the end of its cycle, those funds would typically remain available—but only if you continue with the same employer. Once you leave that employer, you generally lose that carryover benefit unless COBRA coverage applies.

7. In Summary

When changing jobs with an FSA, timing and plan rules are everything. Because the account belongs to your employer, you'll want to use available funds before your final day—or consider COBRA if it makes financial sense. Review your plan documents, confirm deadlines for incurring and submitting expenses, and take advantage of any grace period or run-out window to avoid forfeiting funds.

For more specific questions or unusual situations, contact your benefits administrator, HR department, or a tax professional. Also, be sure to reference:

• IRS Publication 969

• IRS Publication 502

These resources will help you stay compliant and make the most of your FSA before leaving your current role.