When you leave your job, your health FSA stops covering new expenses on your last day of employment, you get a short run-out period to submit claims for expenses you already incurred, and anything left after that is forfeited unless you elect COBRA to keep the account open through the end of the plan year. That’s what happens to your FSA when you leave your job in one sentence. The details below decide how much of your balance you actually keep.
Your Coverage Ends on Your Last Day
Services you receive after your termination date aren’t reimbursable from your health FSA. Your employer’s Section 125 cafeteria plan document sets the exact timing, but that’s the default rule.1Office of the Law Revision Counsel. 26 USC 125 – Cafeteria Plans
Here’s the quirk that changes your strategy: health FSAs are front-loaded. Your full annual election is available from day one of the plan year, regardless of how much you’ve actually contributed through payroll.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans Elected $3,400 and leaving after contributing $1,200? If you’ve already spent the full $3,400 on eligible expenses, your employer absorbs the difference and can’t recoup it from you. The reverse is where people lose money: if you’ve barely touched the account, most of what you contributed is now at risk.
The Run-Out Period for Submitting Claims
Once coverage ends, you enter the run-out period. This is a fixed window to submit reimbursement requests for eligible expenses you incurred before your termination date. It’s commonly 60 or 90 days, but your plan document sets the length. Call your benefits administrator as soon as you give notice and get the exact deadline in writing, because it’s firm. No appeal, no extension.
To get reimbursed you’ll need documentation showing the date of service, what the expense was for, and the amount. Eligible categories track IRS Publication 502, covering doctor visits, prescriptions, and qualifying over-the-counter items like pain relievers, first-aid supplies, and allergy medication.3Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses The expense has to have been incurred while you were still covered. A receipt dated after your last day won’t qualify, no matter how fast you submit it.
Because of front-loading, the run-out math can still work in your favor. If you elected $3,400 but only contributed $1,500, you’re still eligible for reimbursement up to the full $3,400 for expenses incurred while you were covered.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans Most people leaving mid-year land on the other side, with contributions sitting unused.
COBRA Can Keep the Account Open
COBRA works differently from the run-out period. The run-out only lets you file claims for expenses that already happened. COBRA lets you keep incurring new expenses against your FSA through the end of the plan year.
Your former employer isn’t always required to offer it. The general rule is that COBRA must be offered only when the remaining benefit exceeds the total COBRA premiums you’d pay for the rest of the plan year. In practice, that means COBRA is offered when contributions to date exceed claims paid to date. If you’ve already spent more than you contributed, there’s no remaining benefit to continue and you typically won’t get an offer.
Your plan administrator sends a COBRA election notice after learning of your termination, and you have a set window to decide.4U.S. Department of Labor. Health Benefits Advisor for Employers – Consolidated Omnibus Budget Reconciliation Act (COBRA) The cost can run up to 102% of the applicable premium, which is your annual election divided by 12, plus a 2% administrative surcharge.5Office of the Law Revision Counsel. 26 USC 4980B – Failure to Satisfy Continuation Coverage Requirements of Group Health Plans On a $3,400 election, that’s about $289 a month.
Running the Numbers
COBRA for a health FSA only lasts until the end of the current plan year, not the standard 18 months. So the calculation is short. Add up the monthly premiums from your termination through the plan year end and compare that total to your remaining balance.
Say you leave in October with a December 31 plan year end and $1,500 left in your FSA. Three months at roughly $289 is about $867 in premiums for access to $1,500 in tax-free medical spending, a net benefit of around $633 if you actually spend the balance. Leave in February with 10 months remaining and the same $1,500, and you’d pay roughly $2,890 in premiums to protect $1,500. COBRA only makes sense when the balance meaningfully outruns the premiums and you’re confident you can incur enough qualifying expenses before the plan year closes.
Spend the Balance Down Before Your Last Day
If you know your departure date, the most reliable move is to use the balance before you leave. Because the full election is available immediately, you may have access to more than you’ve contributed, and every dollar spent before termination is a dollar you won’t lose.
Purchases that draw down a balance quickly include over-the-counter pain relievers, antacids, antibiotic ointments, first-aid kits, allergy medication, and sunscreen.6FSAFEDS. Eligible Health Care FSA (HC FSA) Expenses Prescription eyeglasses and contact lenses are eligible and absorb larger amounts in a single purchase. Dental cleanings, eye exams, and other routine appointments you’ve been postponing are worth scheduling before coverage ends.
Keep every receipt with a clear date of service. A reimbursement request submitted without proper documentation during the run-out period will be denied, and by then you may not have time to fix it.
Grace Periods and Carryovers Rarely Help Mid-Year Leavers
Some plans include a grace period that extends spending by two and a half months after the plan year ends, and some include a carryover that rolls a limited amount into the next plan year (the maximum carryover for the 2026 plan year is $680).7SHRM. Annual FSA Grace Period Ends March 158FSAFEDS. New 2026 Maximum Limit Updates Both features are tied to the plan year end, not your termination date. If you leave in July, neither one helps unless you’ve elected COBRA and stayed covered through the plan year close. Amounts above the carryover limit are still forfeited.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans
Dependent Care FSAs Play by Different Rules
If you have a dependent care FSA, don’t apply the health FSA rules to it. Two big differences change the outcome.
First, a dependent care FSA is not a group health plan, so COBRA doesn’t apply.9U.S. Department of Labor. COBRA Continuation Coverage There’s no continuation option after you leave.
Second, dependent care FSAs are pay-as-you-go, not front-loaded. You can only be reimbursed up to what you’ve actually contributed.10FSAFEDS. Dependent Care FSA – How It Works If you elected $5,000 and contributed $2,000 before leaving, $2,000 is the ceiling on your reimbursement even if you incurred $4,000 in eligible costs while employed. The rest of the election disappears.
Some employers offer an optional spend-down provision that lets you keep incurring dependent care expenses through the end of the plan year after termination, reimbursable up to whatever you’d contributed. This is authorized under proposed Treasury regulations at Prop. Treas. Reg. ยง1.125-6(a)(4)(v), but it’s optional. Check your summary plan description or ask your benefits administrator whether the provision applies. If it doesn’t, your window closes on your last day and you’re limited to run-out claims for expenses already incurred.
Starting an FSA at a New Job
You can’t transfer or roll over an FSA balance from a former employer to a new one. FSAs are tied to a specific employer’s cafeteria plan, with no portability mechanism like a 401(k) or HSA.
There is one advantage worth knowing about. The annual health FSA contribution limit applies per employer, not per person. For 2026, the health FSA limit is $3,400.8FSAFEDS. New 2026 Maximum Limit Updates If you contributed $2,000 to your old employer’s FSA and then start a new job, you can elect up to $3,400 at the new employer’s plan, even though your combined contributions for the calendar year would exceed the single-plan cap. The IRS treats this as a plan-year maximum, not an individual annual limit.
Enrollment at the new job usually happens during a benefits window or within 30 days of your hire date. It isn’t automatic. You have to actively elect the FSA and pick a contribution amount, and the new account starts at zero, so base your election on the medical expenses you actually expect for the rest of that plan year.