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As 2025 comes to a close, effective year-end planning for flexible spending accounts is more important than ever for maximizing health care savings and avoiding forfeited funds.
Both employers and employees should prioritize year-end FSA strategies to ensure every dollar is put to good use.
Employers play a key role in communicating critical deadlines, eligible expenses, and plan provisions to help employees make the most of their FSA benefits.
"Use it or lose it"
One of the most important FSA rules for 2025 is the "use it or lose it" policy.
Depending on the employer's FSA plan design, employees must incur eligible health care expenses by the end of the plan year, Dec. 31, to avoid losing unspent funds.
Employers should send timely FSA reminders via email, company newsletters, and internal platforms.
They should highlight common eligible FSA expenses for the year, including:
◆ Medical copays and deductibles.
◆ Prescription medications.
◆ Dental and vision care.
◆ Over-the-counter health items like sunscreen, insect repellent, calamine lotion, first aid kits, and cold and flu products.
Regular communication helps employees make informed choices and maximize their 2025 FSA benefits.
FSA carry-over and grace period provisions
Understanding a plan's 2025 FSA plan's carry-over and grace period options is key.
The carry-over provision lets employees roll over up to a specified amount of unused FSA funds into 2026.
The grace period provision gives an extra 2.5 months (until March 15, 2026) to incur eligible expenses.
Employers should clearly communicate which provision applies to their 2025 FSA plan and provide step-by-step guidance so employees can take full advantage and avoid losing money.
FSA reimbursement claim deadlines
To maximize FSA reimbursements for 2025, employees must stay aware of claim submission deadlines.
Most FSA plans offer a run-out period after Dec. 31, during which employees can submit claims for expenses incurred during the plan year.
Employers should share clear, up-to-date information on 2025 FSA deadlines and encourage employees to keep receipts and documentation for all eligible purchases.
Frequent reminders and accessible FAQs help employees avoid missing out on their FSA reimbursements.
Avoidable FSA debit card problems
FSA debit cards offer convenience, but employees should be careful when using them at the end of 2025 and the start of 2026.
Using an FSA debit card to pay for prior-year (2025) expenses in the new plan year (2026) can cause claim denials.
Employers should provide clear guidelines on using FSA debit cards for expenses that span across plan years, ensuring employees don't accidentally lose out on their FSA funds.
Year-End FSA checklist
◆ Communicate all important FSA deadlines and provisions for 2025.
◆ Educate employees on eligible expenses and plan features.
◆ Remind employees about claim submission and documentation requirements.
◆ Offer FSA debit card usage tips for year-end transitions.
Proactive, clear communication helps employees maximize their FSA benefits and enhances overall job satisfaction.
By following these year-end FSA strategies, both employers and employees can achieve better financial wellness and head into the new year with confidence.
Sara Taylor is senior director, employee spending accounts, at WTW.
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