FSA Holders Surrender Unused Funds in 2024

New research shows 40% of flexible spending account holders lost money at the end of the year due to use-it-or-lose-it rules.

Updated on Oct. 27, 2026 in Saving

Flat opaque gouache-painted editorial illustration of a timer with sand forming geometric discs, evoking the loss of personal financial savings. — About 40% of flexible spending account holders in the United States forfeited unused 2024 funds due to expiration rules, losing an average of $404. AI Illustration. Upload story photo >

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Is it worth using a flexible spending account if you risk losing your unspent year-end balance?

Data from the Employee Benefit Research Institute indicates that 40% of flexible spending account (FSA) holders in the United States forfeited unused balances in 2024. Workers lost an average of $404 each as unspent funds expired under the mandated use-it-or-lose-it rule.

Why it matters

Millions of employees lose significant tax-advantaged savings each year because they fail to exhaust their account balances before annual deadlines. Understanding contribution limits and rollover options is essential for maximizing the value of these health-related benefits.

In 2024, the average annual contribution was $1,431 while the average distribution was $1,503. Forfeiture rates varied significantly by age, with 66% of workers under 25 losing funds compared to 36% of those aged 65 and older.

The players

Employee Benefit Research Institute

This is a nonprofit, nonpartisan organization that provides research and education on health, economic, and retirement security issues.

Internal Revenue Service

This is the federal agency responsible for administering tax laws and setting annual contribution limits for various benefit accounts.

The details

To manage these balances, employers may provide a grace period or allow participants to carry over a portion of remaining funds. Using website filters to identify eligible products can help account holders exhaust their remaining balances before deadlines trigger the loss of funds.

2019: The Employee Benefit Research Institute began tracking flexible spending account data.
2023: The average forfeited FSA amount for participants was $436.
2024: 40% of FSA holders surrendered their unused funds.
2026: The IRS maximum annual FSA contribution reaches $3,400.

Market Dynamics

The forfeiture of funds follows a pattern set by the IRS use-it-or-lose-it rule, which mandates that unspent balances expire at the end of the year. This annual cycle creates a structural challenge for participants who must balance tax-advantaged savings with strict spending deadlines.

For 2026, the IRS has increased the maximum annual employee pretax contribution to $3,400 to help workers set aside more for health expenses. Additionally, account holders can now carry over up to $680 in unused funds to the following year if their employer allows it.

The takeaway

Account holders should prioritize spending remaining balances toward the end of each year to avoid unnecessary forfeitures. Tracking contribution limits and verifying if your plan offers carryover options can significantly reduce the risk of losing tax-advantaged funds.