Open Enrollment and Your FSA: Use-It-or-Lose-It, Carryover Limits, and Where the 2027 Numbers Stand

Fall is open-enrollment season, and many workers are choosing how much to set aside in a health flexible spending account (FSA) or health savings account (HSA) for 2027. The rules are easy to mix up and the deadlines are unforgiving, so here is a plain-language walk-through of how these accounts work and which numbers are confirmed.

Educational only: this is not tax advice. Plan features vary by employer, so details should be confirmed with a plan administrator or a qualified tax professional.

FSA versus HSA: the basics

A health FSA is an employer-sponsored account funded by pre-tax salary reductions that reimburses eligible medical expenses. An HSA is a separate account available to people covered by a qualifying high-deductible health plan (HDHP), and its balance generally stays with the account owner year to year. A person who is covered by a general-purpose health FSA generally cannot also contribute to an HSA, according to IRS Publication 969, with limited exceptions such as limited-purpose FSAs. Self-employed people generally cannot participate in an employer FSA.

Use it or lose it

FSAs have a well-known catch: unused money is generally forfeited at the end of the plan year. Employers may soften that rule in one of two ways, but not both. A plan can offer a carryover, which lets a capped amount roll into the next plan year, or a grace period of up to two and a half months after the plan year ends. Both features are optional, so some plans have neither. A plan may also have a run-out period, a window after year-end to submit claims for expenses already incurred. Run-out lengths are set by each plan, not by the IRS, so plan documents are the place to check.

The numbers that are confirmed

• 2026 health FSA limit: $3,400 in employee salary reductions, according to IRS Revenue Procedure 2025-32.
• 2026 carryover maximum: $680 for plans that allow carryover, from the same revenue procedure. A carryover does not change the annual salary-reduction limit.
• 2027 HSA limits: The IRS announced in Revenue Procedure 2026-24 that the 2027 HSA contribution limits are $4,500 for self-only coverage and $9,000 for family coverage, per reporting from the Journal of Accountancy and KPMG. The catch-up contribution for people 55 and older stays at $1,000. HSA eligibility and tax treatment come with conditions, including HDHP coverage; excess contributions and non-qualified withdrawals can carry tax consequences.

What isn't known yet

As of our check on October 28, we did not find an IRS announcement of the 2027 health FSA limit. In recent years the IRS has published FSA figures in the fall. For 2026, the figures came out on October 9, 2025. Some third-party websites list projections for 2027, but those are estimates that conflict with one another and are not official, so this article doesn't repeat them. The IRS website is the place to look for the official figure once it is issued.

Points worth understanding before choosing an amount

• Overestimating has a cost. Unused FSA funds may be forfeited, subject to the plan's carryover or grace-period rules.
• Underestimating has a cost too. Money not set aside pre-tax is paid with after-tax dollars.
• Access works differently. For a health FSA, the full annual election is generally available for reimbursement during the coverage period, according to Publication 969. HSA funds can only be spent once they are deposited.
• Rules can change. Limits are adjusted periodically, and plan terms can change from year to year, so last year's plan may not match this year's.

Everyone's situation differs, and a plan administrator or tax professional can explain how these rules apply to a specific plan.

This article is educational commentary on public tax rules, not personalized investment, trading, or tax advice.