Can You Get an FSA Refund for Unused Funds?
Understand the key regulations for your Flexible Spending Account to effectively manage your contributions and avoid forfeiting your pre-tax funds.
A Flexible Spending Account (FSA) allows you to set aside pre-tax money from your paycheck for qualified medical costs, which reduces your taxable income. The term “FSA refund” is often misunderstood, as you cannot withdraw unused funds as cash. Instead, you are reimbursed for eligible expenses you have already paid. This article explains how to get reimbursed and what happens to leftover funds under different circumstances.
Understanding the “Use-It-or-Lose-It” Rule
A core principle of FSAs is the “use-it-or-lose-it” rule, which mandates that any money remaining in your account at the end of the plan year is forfeited to your employer. The employer can use these funds to cover the plan’s administrative costs or to reduce employee contributions for the next year.
To soften this rule, the IRS allows employers to offer one of two exceptions, but not both. The first option is a grace period, giving employees up to two and a half extra months to use the previous year’s funds. For a calendar-year plan, this extends the deadline to March 15.
The second option is a carryover, which lets you roll a limited amount of unused funds into the next plan year. For 2025, the maximum carryover is $660, though your employer can set a lower limit. An employer is not required to offer either a grace period or a carryover, so you must check your plan documents.
Information Needed for Reimbursement
You must have the correct documentation to show your expense is qualified. Qualified medical expenses include costs for the diagnosis, cure, treatment, or prevention of disease. Common examples are deductibles, copayments, prescriptions, dental treatments, and vision care. Expenses for general health, such as vitamins, are not eligible.
To receive reimbursement, you need an itemized receipt or statement from the provider, as a simple credit card receipt is not sufficient. The documentation must show:
- The date the service was rendered
- The name of the provider
- A specific description of the service or product
- The cost you are responsible for paying
This detail allows the FSA administrator to verify the expense meets IRS guidelines. For many medical services, you will also need an Explanation of Benefits (EOB) from your health insurance company. An EOB is not a bill; it details what insurance covered and what portion is your responsibility, confirming your out-of-pocket cost.
How to Submit a Reimbursement Claim
Most FSA administrators offer several submission methods. The fastest method is often an online portal, where you log in, complete a digital form, and upload scans or photos of your documentation.
Many administrators also provide a mobile app that allows you to complete the entire claim on your smartphone, including taking pictures of your receipts and submitting them instantly. This is useful for managing small, frequent expenses like prescription copayments.
Submitting a claim by mail or fax is also an option. This requires downloading and completing a paper form and mailing it with copies of your documents. After submission, you can track the claim’s status online. Approved claims are paid within a few business days by direct deposit or within a couple of weeks by mailed check.
Accessing Funds After Leaving Your Job
Your eligibility to incur new expenses with your FSA ends on your last day of work, and any remaining funds are forfeited to the employer. You are given a “run-out period” after your termination date to submit claims. This period, often 90 days, is for expenses incurred while you were still an active employee. For example, if you had a doctor’s appointment before you left your job but received the bill after, you can still submit a claim during the run-out period.
Another way to maintain access to your FSA is by continuing coverage through COBRA. This option is available if your account is “underspent,” meaning you have contributed more than you have been reimbursed. Electing COBRA requires you to pay the full monthly contribution plus a potential 2% administrative fee, but it allows you to continue incurring new expenses and use the full annual amount you elected.