FSA Carryover Rule Details: 2022 & 2023 Maximum to Carry Over

We’ve previously covered the basics on flexible spending accounts (FSAs), but the relatively new FSA carryover rule is worth exploring further. For those who do not have access to an HSA (which requires being paired with a HDHP in order to be able to contribute new funds) – FSAs are an excellent alternative, and the FSA carryover rule adds to their flexibility.




When used properly, FSAs allow you to set aside pre-tax contributions that can be used – tax free – for medical expenses ranging from co-pays, to prescriptions, eyeglasses and more.

FSA Use-It-or-Lose-It & Carryover Rule

But, there’s always been one big downside to FSAs – until recent years, you could not carry over funds from one year to the next. It used to be that any unused FSA funds were completely lost at the end of the year. For example, if you contributed $1,000 to an FSA in this year and spent $700 of it during the year on qualified medical expenses, you’d lose the $300 that went unspent.

Losing unspent FSA funds was dis-affectionately dubbed as the “use-or-lose-it” rule. And the funds you lost were eaten up by your employer into an FSA slush fund of sorts. Bummer, right? The “use-or-lose-it” rule had dissuaded many people from contributing to FSAs altogether. One thing worse than medical expenses (which are awful in their own right) is seeing money you’ve earned and set aside for medical expenses taken away by your employer because you couldn’t spend it in time.

FSA carryover rule

To encourage more participation, a few years ago, the IRS began allowing a grace period of up to 2 months and 15 days in which funds from the previous year could be spent in the following year. Still, people were turned off.

The IRS then decided to completely re-evaluate the “use it or lose it” rule. And, it turns out that they have since made a ruling on it. They didn’t get rid of it altogether, unfortunately, but there was a huge positive development.




The IRS permitted a new FSA carryover rule – allowing employer plan participants to carry over 20% of the maximum annual FSA contribution (inflation adjusted each year) of their unused FSA balances remaining at the end of a plan year to the next year.

2022 FSA Maximum Carryover Amount:

As a COVID-relief measure, Congress and the IRS approved new FSA rule changes for 2021 and 2022 that allow up to the maximum FSA contribution to be carried over into the subsequent year (2021 contributions to 2022). This rule is voluntarily implemented by employers (not mandatory).

2023 FSA Maximum Carryover Amount:

Without further Congressional legislation, FSA carryovers for 2022 to 2023 and 2023 to 2024 will revert back to a lower inflation-adjusted maximum. With a 2022 maximum FSA contribution of $3,050, FSA plan participants can carry over up to $610 from 2022 to 2023 (20% of $3,050), if their employer’s plan allows it.

If, for example, you contributed $1,000 in 2022 and spent $400 during 2022 on qualified medical expenses, the unspent $600 could roll over in to 2023, if the employer plan allows it.

Can you do an FSA to HSA Rollover to Avoid Losing Unspent Funds?

No, it is not possible to do an FSA to HSA rollover. This would be a great way to use unspent FSA funds to avoid the “use it or lose it” rules on FSAs, but it is not permitted by the IRS.

FSA Carryover Rule Q & A

The new FSA carryover rule is a big change, so I’m expecting a lot of questions on this new rule, because it is not the most intuitive, yet it suddenly makes FSAs much more appealing to a lot of people. I researched anticipated questions and found answers:

Q: Is my employer required to offer the FSA carryover?

A: No. Employers are not required to adopt this rule, just like they were not required to adopt the grace period rule. In other words, while it was not legal for employers to create their own carry-over rule prior to now, it is now allowed, but not required.

Q: What year does this take effect?

A: This is already in effect. During open enrollment season, check with your HR department if you’re wondering about this.

Q: Can a FSA have both a grace period and the carryover?

A: No. A flexible spending account cannot have both a carryover and a grace period: it can have one or the other or neither, at the employer’s discretion.

Q: Do carried over funds count against the maximum FSA contribution for that year?

A: The FSA carryover also does not impact the indexed maximum FSA contribution. In other words, you could roll over the carryover and still contribute the indexed maximum for that year (maximums per employer plan do vary from the IRS maximum occasionally).

Q: Will the carryover amount carry over more than one year? In other words, if I have $570 roll over to 2023, spend $0 in 2023, will the amount roll over to 2024? 2025?

A: Per the IRS guidance, this is allowed. However, your plan might have differing rules.

If you want all the dirty details and see some examples, here is the IRS FSA carryover rule documentation and IRS Publication 969.

FSA Carryover Rule Discussion:

  • Will this new rule ease your concerns on contributing to an FSA? Or maybe even contribute for the first time?
  • How much will you be contributing to your FSA before/after the rollover rule (if used by your employer)?

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