When Is FSA Money Available for Health & Dependent Care?

Flexible Spending Accounts (FSAs) are employer-sponsored benefit plans allowing individuals to set aside pre-tax money for eligible healthcare or dependent care expenses. These accounts reduce taxable income, offering a way to save on costs associated with medical care or childcare. The funds contributed are not subject to federal income tax, Social Security tax, or Medicare tax, which provides a tax advantage for participants.

Immediate Access for Health FSAs

For Health FSAs, the full annual elected amount is available on the first day of the plan year, regardless of the amount contributed through payroll deductions so far. This is due to the IRS “uniform coverage rule,” which mandates that the maximum reimbursement amount must be accessible at all times during the coverage period. This rule means that even if an employee has only made a few contributions, they can access their entire annual election for eligible medical expenses incurred. For instance, if an individual elects to contribute $3,000 for the year and incurs a $2,000 medical expense in the first month, the Health FSA is required to reimburse the full $2,000, even if only a small portion of the $3,000 has been deducted from their paychecks. This structure places some risk on the employer, as they cannot recoup funds if an employee terminates employment after being reimbursed more than they contributed.

Dependent Care FSA Availability

Dependent Care Flexible Spending Accounts (DCFSAs) operate differently from Health FSAs regarding fund availability. Funds in a DCFSA are only available as contributions are made, or as expenses are incurred and substantiated. Unlike the front-loaded availability of Health FSAs, DCFSAs do not follow the “uniform coverage rule.” For example, if an individual elects to contribute $5,000 to a DCFSA for the year but has only contributed $1,000 by March, they can only be reimbursed up to $1,000 for dependent care expenses incurred by that point. This “as you go” availability is because DCFSAs are not subject to the same employer risk considerations as Health FSAs, which cover unpredictable medical costs. The maximum amount for DCAP benefits remains $5,000 for 2025, or $2,500 if married filing separately.

Scenarios Affecting Fund Access

If an individual enrolls mid-year in a Health FSA, the annual election is pro-rated, but the pro-rated amount is still available immediately due to the uniform coverage rule. For Dependent Care FSAs, mid-year enrollment means funds become available as pro-rated contributions are made. When leaving employment, the ability to incur new expenses through an FSA ceases on the last day of employment. Funds can no longer be used for services or items received after this date. A “run-out” period is often provided, which is a specific timeframe after the plan year or termination date during which participants can submit claims for eligible expenses incurred before their coverage ended. This period allows for the processing of outstanding claims but does not extend the opportunity to incur new expenses.

Extending Your Fund Access

Employers may offer options to extend the period of fund availability beyond the standard plan year, though these are not universally available. One such option is a grace period, which allows participants an additional two and a half months after the plan year ends to incur and use FSA funds for eligible expenses. Another option is a carryover, or rollover, which permits a limited amount of unused Health FSA funds to be transferred into the next plan year. For 2025, the maximum carryover amount for Health FSAs is $660. This carried-over amount becomes available for use in the new plan year, reducing the risk of forfeiting unused funds. Employers can offer either a grace period or a carryover for Health FSAs, but not both. These options are at the employer’s discretion and are specified in the plan documents.