What Happens to Your FSA When You Quit Your Job?
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If you are planning to leave your job soon, you may wonder what will happen to the money you have placed in your Flexible Spending Account (FSA). Whether it is for medical, dental or dependent care expenses, an FSA can be a helpful tax-saving tool, but it comes with a significant catch. Once you leave your employer, you may not get to keep the funds you have not used.
Let us break down what happens to your FSA after you quit, and how you can make the most of it before you go.
Who Actually Owns Your FSA?
An FSA may feel like your personal account, but technically, it is owned by your employer. You and your employer both contribute pre-tax dollars to it, but the money is available for you to use during the plan year only while you are still employed. Once you leave, that access ends, unless you take specific steps to extend it.
If you stay until the plan year ends and still have funds left, some employers offer a small cushion. They may allow you a 2.5-month grace period to spend the remaining balance or permit a rollover of up to $660 (in 2025) or $680 (starting 2026) into the next plan year. But if you leave your job before using those funds, you will likely have to forfeit what is left.
What Happens to Unused Money When You Quit?
FSAs follow a “use it or lose it” rule. That means if you resign or are laid off, any money you have not spent goes back to your employer. You cannot roll it over to your new employer or cash it out.
For instance, if you had $3,000 in your healthcare FSA and spent $2,000 on a dental procedure, the remaining $1,000 would revert to your employer once you leave, unless you act quickly. The only way to continue using that balance is through the Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage, which allows you to keep your FSA active temporarily after you leave your job.
Can COBRA Save Your FSA Balance?
Yes, but it is not automatic. Under COBRA, you can elect to continue your FSA coverage after leaving your job. You will have to pay the full cost of the plan, including any administrative fees, but this can be worth it if you still have significant funds remaining and expect qualified medical expenses before the plan year ends.
For example, if you have $900 left in your FSA and know that you will need new glasses or a medical procedure soon, signing up for COBRA allows you to use that money rather than lose it.
Can You Spend Your Entire FSA Before Quitting?
The answer is, absolutely. This is where the uniform coverage rule works in your favor. Even if you have only contributed part of your total annual election, you can still use the full amount right away. Say you pledged $2,400 for the year but have only paid in $800 so far through payroll deductions, you are still entitled to spend all $2,400 on eligible medical expenses anytime during your employment.
There is no requirement to repay your employer if you leave afterward. So, if you are planning a move or career change, it may make sense to schedule medical appointments or buy eligible health products before your last day.
Smart Ways to Use Up Your FSA Funds
Before you hand in your notice, check your FSA balance. Knowing exactly how much you have left helps you plan your spending wisely. You can use the money for approved healthcare costs such as prescription glasses, contact lenses, dental treatments or over-the-counter medications.
If you have already paid for qualified expenses out of pocket, do not forget to submit your receipts for reimbursement. Most employers allow 60-90 days after your employment ends to file claims for expenses incurred while you were still employed. Missing that deadline may mean losing reimbursement rights entirely.
Don’t Leave Free Money on The Table
Your FSA is a valuable benefit that helps you save on healthcare costs, but it comes with strict rules. Once you leave your job, any unused funds generally stay behind with your employer. Planning ahead by checking your balance, scheduling appointments and using your contributions strategically can help you avoid forfeiting money that is technically yours.
If you are between jobs, COBRA may offer a short-term bridge that allows you to use what is left in your FSA. But in most cases, the best move is to spend those funds before you walk away. A little preparation now can make sure that you do not lose hard-earned dollars later.