Run-out period
The run-out period is the timeframe during which you can submit any outstanding expenses to Forma before losing access to your funds. Typically, this period lasts 90 days after the end of the plan year, though it may vary. Please note, this deadline does not extend the time to incur new claims, but it does allow you additional time to submit claims for expenses incurred during the previous plan year and be reimbursed with the previous plan year’s money. Important: A run-out period gives you extra time to file claims for expenses that already happened; not extra time to use expired money.
Employers can offer a run-out period for Health Care FSA, Limited Purpose FSA, and Dependent Care FSA plans.
Grace period
The grace period is an additional 2.5 months after the plan year ends, during which you can incur new expenses and submit claims. If your employer offers a grace period, you’ll have extra time to use your remaining FSA funds for expenses incurred in the new plan year. Important: The grace period allows you to extend the use of your FSA funds that would otherwise expire.
Employers can offer a grace period of up to 2.5 months for Health Care FSA, Limited Purpose FSA, and Dependent Care FSA plans.
Carryover
Carryover allows unused FSA money (up to the IRS maximum) to automatically carry over 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.
Important: Your employer can offer either a grace period or a carryover, but not both. They're also not required to offer either and can change their policy each new plan year.
Example
Suppose you have an FSA account in 2024 and there's a 90-day run-out period and a 2.5 month grace period.
- Run-out period. You can submit claims for any eligible expenses incurred in 2024 until March 31, 2025. Your leftover 2024 funds would be used to reimburse these claims.
- Grace period. You can submit claims for any eligible expenses that occurred between Jan 1, 2024 and March 15, 2025 until March 31, 2025. Your leftover funds from 2024 would be used to reimburse these claims.
- Carryover. Starting April 1, 2025, you can use carryover funds from 2024 to pay for eligible expenses that occur between Jan 1, 2024 and Dec, 31 2024.
Note: The key difference between the run-out and the grace period is the dates of service. Forma reviews claims based on service date (as opposed to payment date) per IRS guidelines
A run-out period gives you additional time to submit claims incurred during the prior plan year. A grace period gives you additional time to incur (receive service) claims that can be reimbursed from prior year funds.