About four in 10 FSA account holders forfeited unused funds to employers, EBRI finds

Those who forfeited funds returned an average of $404 to their employers, down from $436 in 2023. The findings highlight continued opportunities to help workers make more effective use of their health care benefits.

The report, "Updates From EBRI's Flexible Spending Account Database, 2024," examines contributions, distributions and forfeitures using a database containing more than 3.3 million accounts and more than $3.9 billion in contributions.

The research found that workers' use of FSAs varies by age, with younger account holders contributing less and facing a greater likelihood of forfeiting unused funds.

FSAs allow workers to set aside pretax dollars for qualified health care expenses. However, unused funds may be forfeited to employers, depending on a plan's spending deadlines and whether it offers a limited carryover or additional time to use remaining balances.

"FSAs can help workers stretch their health care dollars, but understanding how to use these accounts is essential to maximizing their value," said Jake Spiegel, senior research associate, health and wealth, at EBRI.

"The decline in average forfeitures is encouraging. Still, the findings point to opportunities for employers to help workers better understand eligible expenses, plan deadlines and the features available to manage unused balances."

Key findings

• Average forfeitures declined. Among account holders who forfeited funds, the average amount fell to $404 in 2024 from $436 in 2023. The 2024 average was the lowest observed since EBRI established its FSA database in 2019 after adjusting for inflation.
• Younger workers were more likely to forfeit funds. Two-thirds of account holders younger than 25 forfeited funds, compared with 36% of those age 65 and older. Among those with forfeitures, older account holders forfeited larger amounts on average.
• Average contributions increased modestly. Account holders contributed an average of $1,431 in 2024, up from $1,413 in 2023. After adjusting for inflation, average contributions declined slightly.
• Most account holders used their funds. Eighty-nine percent took a distribution in 2024, compared with 88% in 2023. Among those who did, the average distribution was $1,503.
• Contributions varied substantially by age. Account holders younger than 25 contributed an average of $623, compared with $1,639 among those ages 45 to 54.

The research also found relatively small differences in average contributions and distributions among accounts with carryover provisions, grace periods or neither feature. Average contributions ranged from $1,365 for accounts without a carryover or grace period to $1,489 for accounts with a grace period.

The report concludes that greater awareness of plan features and spending requirements could help workers use FSAs more effectively. It also identifies efforts to make eligible purchases easier, such as website filters for FSA-eligible products, as a potential way to reduce unused balances.

The report notes that forfeiting funds does not necessarily eliminate the financial benefit of participating in an FSA, because tax savings may exceed the amount forfeited.

About EBRI

The Employee Benefit Research Institute is a nonprofit, nonpartisan research organization that has provided independent, objective and fact-based research on employee benefits and financial security since 1978.

For more information, visit www.ebri.org.