Notice & DisclosureAnnual
FSA Use-or-Lose / Grace Period / Rollover Notice
IRC § 125; IRS Notice 2005-42; IRS Notice 2013-71
Employers must notify participants of FSA forfeiture rules, whether a grace period (up to 2.5 months) or carryover applies, and the deadline to incur claims. Carryover limit is indexed annually by the IRS. Critical for ER-funded FSAs.
ResponsibleClient/Other TPA (compliance TPA)
Deliver ToParticipants with FSA elections
Legal timingBefore plan year start (with enrollment materials); reminder before deadline
Our targetWith enrollment materials, about 30 days before the plan year starts. This is our recommended timing, not a legal deadline for every plan. The legal timing is above.
Current Fee / Rate Information
Maximum carryover from a 2026 plan year into 2027: $680 (IRS Rev. Proc. 2025-32). The 2027 figure comes out in the fall IRS inflation revenue procedure, usually October or November. Grace period alternative: up to 2.5 additional months after plan year end. A plan can offer the carryover or the grace period, not both.
Last reviewed: October 2026
Official Source
https://www.irs.gov/publications/p969Get Your Compliance Calendar →
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