Do You Get a New FSA Card Every Year?
Understand the yearly cycle of your FSA card: its validity, how funds are managed, and your essential annual enrollment decisions.
A Flexible Spending Account (FSA) allows you to set aside pre-tax money from your paycheck to pay for eligible healthcare expenses. This tax-advantaged benefit allows you to reduce your taxable income while covering out-of-pocket medical, dental, vision, and prescription costs. FSAs are employer-sponsored benefits offered through your workplace.
Understanding Your FSA Card’s Annual Status
Whether you receive a new FSA card each year depends on the specific policies of your plan administrator and employer. There isn’t a universal rule; some cards are valid for multiple years, while others expire at the end of a plan year. Many FSA cards automatically renew, or a new card is mailed as your existing one approaches its expiration date.
Determine your FSA card’s validity by checking the expiration date printed on the card. If no expiration date is visible or you are unsure, contact your plan administrator. Many FSA providers also offer online portals or mobile applications where you can check your card’s status and manage your account. If your current card expires, is lost, or stolen, you will need to request a replacement, which your administrator can facilitate.
A new physical card is not always necessary for your FSA funds to be accessible each year. The card serves as a convenient way to pay for eligible expenses, but its physical validity is separate from the annual election of funds. Even if your card remains valid for several years, it will access the funds allocated for the current plan year, assuming you have re-enrolled in the FSA for that year. Your employer and plan administrator will provide specific guidance on card reissuance or continued use.
Navigating Year-End FSA Funds
Understanding what happens to unused funds at the end of the plan year is important for managing a Flexible Spending Account. FSAs traditionally operated under a “use-it-or-lose-it” rule, where unspent money was forfeited. While this rule is still the default, the IRS provides employers with two optional provisions for more flexibility.
Employers can implement a grace period, allowing participants up to two and a half months after the plan year ends to incur eligible expenses and use previous year’s remaining funds. For example, for a plan year ending on December 31, a grace period might extend the spending deadline until March 15 of the following year.
Alternatively, employers may offer a carryover option, which permits a limited amount of unused FSA funds to roll over into the next plan year. For plan years beginning in 2024, the maximum carryover limit is $640, increasing to $660 for 2025. This carried-over amount does not count against your annual contribution limit for the new plan year.
Employers can choose to offer either a grace period or a carryover, but not both, in addition to the standard “use-it-or-lose-it” rule. Your employer’s FSA plan documents will detail which options apply. Reviewing these documents or contacting your plan administrator is advisable to understand the specific rules governing your year-end funds.
Annual FSA Enrollment and Contributions
Participating in a Flexible Spending Account requires re-enrollment each year, as FSAs do not automatically renew. During your employer’s annual open enrollment, you decide whether to participate in the FSA for the upcoming plan year and elect a new contribution amount based on anticipated healthcare needs.
When you elect to contribute to an FSA, the chosen amount is deducted from your gross pay in equal installments throughout the plan year, before taxes are calculated. This pre-tax deduction reduces your taxable income, leading to tax savings. The full elected amount is available for use from the first day of the plan year, regardless of how much has been deducted from your paychecks.
Life circumstances can change, and certain qualifying life events may allow you to adjust your FSA election outside of the regular open enrollment period. These events can include marriage, divorce, birth or adoption of a child, or a change in employment status for you or your spouse. These events provide a window to modify your contribution amount to align with your revised healthcare spending needs. Notify your employer following a qualifying life event to explore adjustments to your FSA election.