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Published: Mar 14, 2022 12 min read
Person buying medicines with a FSA account
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Flexible spending account (FSA) holders forfeited an estimated total of $7.2 billion in 2019 and 2020, a much higher amount than previously estimated, according to new data obtained and exclusively analyzed by Money.

FSAs allow millions of employees to use pre-tax dollars for approved health-related expenses, including copays, prescriptions and over-the-counter medicines. The catch: If you enroll, IRS rules require you to spend the money you contribute into your account by an annual deadline. In other words, if you don’t use it, you lose it: the money is forfeited.

More than 40% of workers with FSAs forfeited at least part of their account contributions in recent years, according to new data that the nonprofit Employee Benefit Research Institute (EBRI) shared with Money. On average, they lost between $339 and $408 a year by not using up all of their FSA money by the spending deadline. All that forfeited FSA money isn't tracked closely by the federal government, and it's likely those billions of forfeited dollars ended up going right back into employers' pockets.

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For workers without predictable medical expenses, the spending deadline makes participating in an FSA plan a bit of a gamble. When enrolling, you must make an educated guess upfront as to how much money to put into your FSA (up to a max of $2,850 in 2022), based on how much you think you'll spend on eligible out-of-pocket health expenses throughout the year.

Employers often set the FSA spending deadline on Dec. 31, though many choose to give their workers a “grace period” of 2 1/2 months — pushing the ultimate deadline to March 15. (Let this be your reminder: Check your FSA balance and spending deadline.)

The “use-it-or-lose-it” design has long been considered a weakness of FSA plans, but it’s been hard, until now, to get a thorough assessment on just how much money workers were losing. In fact, Money’s estimate — that workers have forfeited at least $3 billion annually in recent years — is six times higher than older, more limited estimates from the FSA industry.

Workers lost billions to FSAs in recent years

About 40% of the private workforce has access to FSAs, according to the best government data available. But that figure says nothing about how many Americans actually sign up for FSAs.