Can You Open a Flexible Spending Account Anytime?

A Flexible Spending Account (FSA) is a tax-advantaged account that allows individuals to set aside pre-tax money from their paychecks for eligible healthcare or dependent care expenses. This reduces taxable income. Generally, you cannot open an FSA at any time during the year; enrollment is restricted to specific periods or triggered by certain life events. This structure is governed by IRS regulations, particularly Internal Revenue Code Section 125.

Standard Enrollment Periods

Flexible Spending Accounts are typically offered as an employer-sponsored benefit. The primary opportunity to enroll in an FSA is during the annual “open enrollment” period. This period usually occurs in the fall, allowing employees to make benefit elections for the upcoming plan year, which often begins on January 1st.

During open enrollment, employees decide whether to participate in an FSA and determine the annual contribution amount they wish to set aside for the next year. These contributions are made through pre-tax payroll deductions. Once the open enrollment period closes, employees generally cannot enroll in an FSA or change their elected contribution amount until the next open enrollment period.

Qualifying Life Events

While open enrollment is the standard period for FSA elections, “qualifying life events” (QLEs) may allow enrollment or changes to an existing FSA outside this window. These events are defined by the IRS and permit adjustments to benefits consistent with the event. Common QLEs include:
A change in your legal marital status, such as marriage, divorce, or legal separation.
The birth or adoption of a child, or placement for adoption.
The death of a spouse or dependent.
Changes in employment status for you, your spouse, or a dependent that affect eligibility for health insurance benefits, including starting a new job with benefits or a change in work hours that significantly alters the need for dependent care.
A change in a dependent’s eligibility, for example, a child turning 13 and no longer qualifying for a Dependent Care FSA.

Following a qualifying life event, there is typically a limited timeframe, often 30 or 60 days, during which you must notify your plan administrator and make the desired changes.

Managing Your Flexible Spending Account

Once an FSA is established, contributions are deducted from your gross pay before taxes, which lowers your taxable income. Funds in the account can typically be accessed using a dedicated debit card or through a reimbursement process. The IRS determines which expenses are eligible for reimbursement, generally including medical, dental, and vision costs not covered by insurance for healthcare FSAs, and childcare expenses for dependent care FSAs.

A rule governing FSAs is the “use it or lose it” provision, meaning any unspent funds remaining in the account at the end of the plan year are generally forfeited. However, employers may offer options to mitigate this rule. Some plans include a grace period, which extends the time to incur eligible expenses for an additional 2.5 months after the plan year ends. Alternatively, some employers may allow a limited amount of unused funds, such as up to $660 for plan years ending in 2025, to be carried over into the next plan year. An employer can offer either a grace period or a carryover, but not both, and some plans may offer neither.