Changing Jobs Before the New Year? What Happens to Your FSA

Leaving a job before the end of the year comes with a long to-do list. Somewhere between the exit interview and returning your laptop, you might realize you still have money sitting in your flexible spending account (FSA).

So what happens to your FSA when you leave a job? In most cases, unused healthcare FSA funds stay with your former employer. However, timing matters more than most people realize. Whether you quit or your role is eliminated, knowing when your coverage ends, how long you have to file claims, and which post-exit options exist can help you make the most of the money you've already set aside.

Here's what to know before your last day, plus a simple checklist to help you plan.

An FSA is an employer-sponsored benefit. Unlike a health savings account (HSA), you don't personally own it. The account exists because your employer offers it, and your access to it is tied to your employment.

As an employee, you choose how much to contribute for the plan year during open enrollment. That amount is deducted from your paychecks before taxes and can be used to pay for qualified medical expenses, such as copays, prescriptions, dental work, and vision care.

Two rules shape what happens when you leave:

• The use-it-or-lose-it rule: Under IRS rules, FSA funds generally must be used for expenses incurred within the plan year. Money left unspent is typically forfeited to your employer, aside from any grace period or limited carryover your plan offers.
• The uniform coverage rule: your full annual election is available from the first day of the plan year, even though you contribute in installments. That means you can spend more than you've contributed so far.

The second rule is good news for job changers. If you've spent more than you've put in by the time you leave, you generally don't have to pay the difference back.

This is one of the biggest differences between FSAs and HSAs since an HSA belongs to you and rolls over year after year, even when you change jobs.

When your job ends, your healthcare FSA coverage typically ends too. Any funds you haven't used for eligible expenses incurred before that date are generally forfeited to your employer.

In most cases, yes. Your FSA doesn't follow you to your next employer, and you can't cash out the remaining balance. Your coverage usually ends on your last day of employment, though, depending on your plan, it may extend to the end of that month. Check your plan's summary plan description (SPD) or ask HR for your exact end date.

The rules are the same whether you quit, retire, or are laid off. A layoff doesn't create special protections for your FSA balance. Your coverage ends based on your plan's terms, and unused funds are typically forfeited.

Plan features like run-out periods and COBRA can affect your timing. But they don't turn the account into something you own after you leave.

The key rule is simple: an expense counts when the care or purchase happens, not when you're billed or file the claim. Anything incurred after your coverage ends generally isn't eligible.

You generally can't use FSA funds for new expenses after your coverage end date. Your FSA debit card is often deactivated on or shortly after your last day. Money already deducted from your paychecks usually can't be spent on care you receive after that date.

Yes, as long as the expense was incurred while you were still covered. Most plans include a run-out period that lets former employees file claims after termination for those earlier expenses.

Your plan sets the deadline. Run-out periods vary, but 30 to 90 days after coverage ends is common, and some plans use a fixed date instead. Miss it, and those reimbursements are typically forfeited.

A run-out period usually applies. It gives you extra time to submit claims, not to incur new expenses. A grace period or carryover is different. These features generally apply only to employees still enrolled when the plan year ends, so they usually don't help if you leave mid-year unless you elect COBRA.

Only qualified medical expenses incurred on or before your coverage end date. That includes appointments, prescriptions, and eligible products purchased while your coverage was active.

• Confirm your exact coverage end date with HR or your plan administrator
• Find out when your FSA debit card will be shut off
• Write down your run-out deadline for submitting claims
• Check your remaining balance against your annual election
• Schedule any needed appointments before your last covered day
• Gather itemized receipts and any Letter of Medical Necessity (LMN) for purchases
• Ask whether COBRA is available for your healthcare FSA

If you have care you need anyway, scheduling it before your last day lets you use pre-tax funds you've already contributed. Options may include:

• Medical office visits, copays, and deductibles
• Dental cleanings, fillings, and other treatment
• Vision care, including eye exams, prescription glasses, and contact lenses
• Therapy and other mental health visits
• Planned procedures, lab work, and physical therapy

Besides the obvious FSA eligible expenses, there are thousands of health-related expenses that may be HSA/FSA eligible for qualified customers when supported by additional documentation. Some of those expenses include gym memberships, fitness equipment, and specialty footwear. Products in these categories may qualify when a licensed practitioner determines they're medically necessary to treat a documented health or medical condition and issues a Letter of Medical Necessity.

Eligible supplies can be another way to use your balance before coverage ends. Common examples include:

• Prescription refills, where your pharmacy and plan allow
• First aid supplies and over-the-counter medications
• Broad-spectrum sunscreen (SPF 15 or higher)
• Contact lenses and solution
• Hearing aid batteries and related supplies
• Supplies for managing a chronic condition, like blood glucose test strips

Just keep purchases reasonable. Buying far more than your household could realistically use may lead your plan administrator to question or deny a claim. Stick to amounts you'd expect to use for your own care, your spouse, or your dependents.

Before weighing your options, check which type of FSA you have. A healthcare FSA covers qualified medical expenses. A dependent care FSA covers child or adult care so you can work. The two follow different rules after you leave.

Sometimes. COBRA eligibility depends on your employer and your account balance. If your employer is subject to COBRA, you may be able to continue your health FSA through the end of the current plan year. Employers generally only have to offer this when your account is underspent, meaning you've contributed more than you've been reimbursed.

There are trade-offs:

• Contributions become post-tax: you pay them directly instead of through pre-tax payroll deductions.
• An admin fee may apply: COBRA premiums can include an admin fee of up to 2% on top of your contribution.
• It rarely makes sense when you're overspent: if you've already been reimbursed more than you've contributed, the uniform coverage rule works in your favor, and continuing would mean paying in with no extra benefit.

COBRA tends to be most useful when you have a large remaining balance and planned care you can't spend down before your last day. Thankfully, platforms like Truemed make it easy to spend down remaining FSA balances when you’re in a pinch. Explore the Truemed marketplace to discover thousands of products that are FSA eligible for qualified customers.

No. Healthcare FSA funds generally cannot transfer or roll over to a new employer's plan. A new job usually means enrolling in a separate FSA, if your new employer offers one, with its own election and plan year. You can employ the same planning strategies with that account next year.

Dependent care FSAs aren't subject to COBRA, and many plans handle them differently. Some let you keep submitting claims for eligible care through the end of the plan year, up to the amount you contributed. Check with HR about your plan's specific dependent care FSA rules, since they vary by plan.

Suppose Rachel elected $2,400 for her healthcare FSA this year, contributing $200 per month. She accepts a new job and her last day is October 31. By then, she has contributed $2,000 and been reimbursed $800, leaving $1,200 unspent.

Rachel confirms with HR that her coverage ends October 31 and her plan has a 90-day run-out period. Before her last day, she books an overdue dental cleaning, orders a year's supply of contact lenses, and qualifies for an LMN so she can invest in an air purifier to treat her seasonal allergies. She saves every itemized receipt.

In November, she submits her claims. They count because the expenses were incurred before her coverage ended. If she still had a large balance left, she could have asked about COBRA to continue the account through December.

Now consider the opposite scenario. If Rachel had already been reimbursed $2,400 by October, she would have spent $400 more than she contributed. Under the uniform coverage rule, she generally wouldn't owe that back.

When you leave a job, unused healthcare FSA funds usually stay behind. The money you can still use is limited to expenses incurred before your coverage ends, so your plan's end date and claim deadline matter most.

Before your departure, confirm those dates, schedule the care you need, and keep your receipts. A few hours of planning can help you put pre-tax dollars you've already contributed toward your health instead of leaving them on the table.

Some health purchases aren't automatically qualified medical expenses. For example, cardio equipment, supplements, and certain red light therapy products may only qualify when they're used to treat, mitigate, or prevent a specific medical condition.

Truemed* is an HSA/FSA marketplace and payments tool that unlocks preventive health care for HSA and FSA account holders. When you complete Truemed's health survey, an independent licensed practitioner reviews your information to determine whether a product may be medically necessary for your condition. If approved, you'll receive a Letter of Medical Necessity, which qualified customers can use to pay for eligible items with HSA/FSA funds.

If you're changing jobs, timing still applies. The practitioner's determination and your purchase both need to happen before your FSA coverage ends. Check your plan details before you buy, and learn how Truemed works or browse HSA/FSA-eligible products.

*Truemed is for qualified customers. See terms at truemed.com/disclosures.