If your employer offers a carryover, they can set a certain amount of unused FSA money to automatically transfer to your next year’s FSA after the run-out period. Because of this, most carryovers won’t finish until 90 days into the new plan year. The maximum carryover amount is determined by the IRS. Only FSAs and LPFSAs are eligible for carryover.
Any amount carried over from a previous plan year doesn’t count toward your annual election, so you can still contribute up to the IRS maximum for the new plan year.
The IRS provides the employer the right to determine the length of the run-out period, so this amount of time could vary. The maximum length of the run-out period is 90 days.
For example, if your employer provides a 90-day run-out period for the FSA plan. At the end of 2022, your FSA balance was $600.
- The 90-day run-out period is from January 1, 2023 to March 31, 2023. In this period, you can file reimbursement claims for eligible expenses from 2022.
- If you use your pre-tax Forma Card during the run-out period, the expense will use your 2023 money instead of 2022 money since the expense occurred in the current year.
- If you didn't spend any of the $600 during the run-out period, on April 1, you'll see $570 (IRS carryover limit) rolled over to your 2023 FSA.