The "Use It or Lose It" Rule
Under current U.S. tax law, unused balances in the Health Care Spending Account are subject to forfeiture.
If you have a balance in the Health Care Spending Account after submitting all claims incurred during the plan year (January 1 – December 31), you can carry over $570 to the following plan year. Any remaining balance that exceeds $570 will be forfeited after the claims filing deadline (March 31 of the year following the plan year). This unused balance cannot be returned to you or carried forward for future use.
There is a $25 minimum carry over amount for employees who do not contribute to the Health Care Spending Account for the following plan year.
- Assume you contribute $2,200 to the Health Care Spending Account and have $300 in your MRA (those funds are used first for eligible medical and prescription drug costs before your HCSA)
- Assume your eligible medical claims during the plan year (January 1 – December 31) are $400 and your dental/vision claims are $1,400. The $300 in your MRA is used first to pay your eligible medical claims. Your HCSA is used to pay the remaining $100 in medical claims plus the $1,400 in dental/vision claims.
- Assuming you submit all your claims by the deadline (March 31 of the year following the plan year), your unused balance in your HCSA would be $700.
- You would be able to carry over $570 of the unused balance to the following plan year (the plan year immediately following the one in which you contributed $2,200).
- You would forfeit the remaining $130 balance.
It's very important that you plan carefully before you decide how much to contribute to the Health Care Spending Account, because your MRA funds are used first for eligible medical and prescription drug expenses and that you file your claims by the claims filing deadline: March 31 of the year following the plan year.
For detailed instructions on how to submit claims, see "Paper Reimbursement Claims."