Grace Period vs. Run-Out Period: An Overview

A health flexible savings account, or health FSA, is an account to which you contribute money, the funds of which are dedicated to medical expenses, such as 澳洲幸运5官方开奖结果体彩网:deductibles and copays. In 2025, you can contribute up to $3,300 to your health FSA (up from $3,200 in 2024), but that money must be spent during the plan year unless the plan permits the carryover of funds. A 澳洲幸运5官方开奖结果体彩网:grace period is a period of coverage at the end of the plan year that gives you more time to use your remaining FSA balance, while a run-out period is a tim🐈eframe during the new plan year when you c🐎an file claims for expenses from the previous year.

What Is an FSA Grace Period?

An 澳洲幸运5官方开奖结果体彩网:FSA grace period is typically a two-month and 15 day period following the end of the plan year, although employers decide if you get 🍨a grace period and how long it lasts. During this time, FSA owners must usꦉe any remaining funds left over from the previous plan year. If the funds are not used during the grace period, they are forfeited.

Your employer decides the length of the grace period, although the maximum grace period (per Internal Revenue Service (IRS) rules) is two months and 15 days. If your employer doesn't allow a grace period, they might offer a rollover option. A rollover enables FSA owners to roll over up to $600 of unused healthcare FSA dollars from the previous year to spend at the start of the new plan year. Only one of these options can be used, but an employer is not required to use either of these options.

It is i🌺mportant to check with your company’s benefits administrator or HR representative to learn more about your options.

What Is an FSA Run-Out Period?

A run-out period is a timeframe in the new plan year during which you can file claims for expenses incurred in the previous plan year. The timeframe for a run-out period is set by your employer, not the IRS. However, it is common for run-out periods to laꦏst 90 days after the end of the plan year. So, if your plওan year is from Jan. 1, 2024, to Dec. 31, 2024, you have until March 31, 2025, to file a claim.

If you have a grace period, it will overlap with🐼 your run-out period. It is important to keep in mind that all ex🦩penses incurred during the grace period must be claimed before the run-out period ends.

Any money remaining in the account at the end of the run-out period that cannot be carried over into the next plan year is f🔯orfeited. Since you do not have to put the full allowable account ($3,300 for 2025 or $3,200 for 2024) into your account every year, you should carefully decide how much to contribute so that you don’t lose money, especially if you have low medical expenses and your employer does not offer a grace period or a carryover.

Despite this use-it-or-lose-it downside, the biggest advantage of a health FSA is that you can contribute the money before taxes are deducted, essentially making the money tax-free. Since the top tax bracket in 2024 and 2025 is 37%, the highest potential tax saving on the full contribution amount of $3,200 is $1,184 (for 2024) and $3,300 is $1,221.00 (for 2025). Those who are in lower tax brackets and those who do not contribute the full amount have lower tax savings, but if you know you will spend the money anyway, you can pℱut some of your tax money toward medical costs.

The Bottom Line

It's important to understand when you can use your FSA funds or you risk losing them. The grace period is an important option offered by some employers to help you use up your FSA funds before the coverage year ends.

Similarly, your employer also determines the run-out period, which can overlap with the grace period. If you're unsure what your grace period and run-off period are, contact your company's HR for specifics.