Three rules people mix up. Only two let you keep spending. Only one of those applies to your plan. Getting this right determines whether your December 31 balance is still usable in January or already gone.
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All three are optional employer provisions, not IRS defaults. Your plan either has them or it doesn't, and the specifics are spelled out in the Summary Plan Description.
| Rule | What it does | Typical duration |
| Grace period | Extends spending on leftover balance into the new year | Up to 2.5 months |
| Carryover | Rolls up to $660 (2025) or $680 (2026) into next plan year | Indefinite |
| Runout period | Extends claim filing window only — no new spending allowed | 60 to 90 days |
A grace period lets you treat the first 2.5 months of the new plan year as a bonus window for spending leftover funds. For a December 31 plan, that means you can keep incurring eligible expenses through March 15 using your prior-year balance.
Carryover is the more generous-feeling option for casual FSA users — a set dollar amount automatically moves into your next plan year with no expiration pressure. The 2025 limit is $660; the IRS adjusted it to $680 for 2026. Anything above the cap is still forfeited.
The runout period is the most misunderstood rule. It sounds like extra time to spend, but it is not. It is the window to file paperwork for expenses already incurred before the plan year ended.
The IRS prohibits combining the two. When carryovers were first introduced in 2013, the agency required employers to choose one or the other, reasoning that allowing both would stretch the original "use it or lose it" intent of cafeteria plan rules too far. The restriction has stayed in place through every subsequent rule update.
Practically, this means you only need to plan for one type of extension — whichever your employer chose. If you're unsure which one your plan offers, the plan year deadline dates page walks through where to find it. Read our breakdown of what happens to unused FSA money for the broader rule.
Grace period, carryover, no extension at all — every configuration benefits from a reminder that fires while you still have time to act. The extensions exist because forgetting is common, but they don't make forgetting free. Set a reminder and you won't need to rely on the fine print at all.
Start with the FSA spending reminder guide.
An optional extension of up to 2.5 months after the plan year ends, during which you can continue to incur eligible expenses using your leftover balance. For a calendar-year plan, the grace period runs from January 1 through March 15 of the following year. Not all employers offer it.
A provision that lets up to $660 (for 2025) or $680 (for 2026) roll over from one plan year into the next, without a deadline on when that carried-over amount must be spent. It adds to the next year's election. Employers can offer a carryover instead of — but not in addition to — a grace period.
A claim filing window after the plan year or grace period ends. You cannot incur new expenses during the runout. You are just submitting receipts for expenses that already happened. Most plans use a 60 to 90 day runout, so claims for a December 31 plan year are typically due by late March or April.
Check your Summary Plan Description or benefits portal. Employers choose one configuration: no extension, a grace period, or a carryover. The IRS does not allow both a grace period and a carryover on the same FSA — the two are mutually exclusive.
No. IRS rules require employers to pick one. If your plan offers a carryover, there is no grace period; if it offers a grace period, there is no carryover. Some employers offer neither, and the standard use-it-or-lose-it rule applies with no extension.
No. The runout only extends the time to file claims, not to incur expenses. If your plan year ends December 31 and you have a 90 day runout, any service or purchase after December 31 does not qualify — even though you can still submit paperwork through March.
Free, no account, 30 seconds. You'll know when to spend your balance whether or not your plan has a grace period or carryover.
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