About 40% of flexible spending account holders forfeited funds in 2024, averaging $404, according to an Oct. 15 brief from the Employee Benefit Research Institute.
FSAs allow for pretax contributions and tax-free distributions on qualified medical expenses. The Bureau of Labor Statistics estimated that 72% of state and local government employees, as well as 47% of those in the private sector, had healthcare FSAs available in recent years.
Here are six things to know from the report:
- During the pandemic, employers were able to opt into a provision that allowed workers to carry over more funds than typically permitted. Since the return of pre-pandemic forfeiture rules in 2022, account holders have reduced their forfeitures. Inflation-adjusted average forfeitures were $469 and $449 in 2022 and 2023, respectively.
- Account holders contributed $1,431 to their FSAs on average in 2024. Looking at the 89% who took a distribution, the average distribution was $1,503.
- FSA contributions and distributions tend to track with employee age. Account holders who were under 25 years old contributed $623 on average, and the average contribution peaks at $1,639 for those who were between 45 and 54 years old. Only 63% of employees under 25 took distributions in 2024, whereas that share peaked at 93% for those 45 and older.
- The share of employees forfeiting funds declined with age. Two-thirds of account holders under 25 forfeited funds versus 36% of those who were at least 65.
- In 2024, only 5% of account holders contributed the statutory maximum of $3,200. Eight percent contributed the 2023 statutory maximum in 2024, suggesting possible awareness gaps with contribution increases.
- Employer contributions to FSAs are uncommon. Only 5% of FSA account holders received these contributions, compared with 45% of people with health savings accounts.
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