Quick answer: A Flexible Spending Account (FSA) is a pre-tax account that lets employees set aside money from their paycheck to pay for eligible medical or dependent care expenses. For 2026, the health care FSA contribution limit is $3,400 per employee, with up to $680 allowed to carry over into the next plan year.
How does an FSA work?
Employees elect an amount to contribute during open enrollment, and that amount is deducted from their paycheck before taxes, lowering their taxable income. Unlike an HSA, an FSA is owned by the employer's plan, not the individual, and in most cases isn't portable if the employee leaves the company.
Types of FSAs
- Health Care FSA — covers qualified medical, dental, and vision expenses
- Dependent Care FSA — covers eligible child or adult dependent care costs
- Limited Purpose FSA — covers dental and vision only, typically paired with an HSA
2026 FSA contribution limits
- Health Care FSA: $3,400 per employee (up from $3,300 in 2025)
- Carryover limit: $680 (up from $660 in 2025)
- Dependent Care FSA: $7,500 per household ($3,750 if married filing separately), a significant increase from the previous $5,000 limit under the One Big Beautiful Bill Act
What happens to unused FSA funds?
This is where FSAs differ most from HSAs. FSA funds are generally "use it or lose it" by the end of the plan year, unless your employer offers a carryover (up to $680 for 2026) or a grace period. Unlike an HSA, FSA balances typically don't roll over indefinitely and don't follow you to a new job.
FSA vs. HSA vs. HRA
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FSA
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HSA
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HRA
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Who owns it
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Employer plan
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Employee
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Employer
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Requires HDHP
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No
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Yes
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No
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Rolls over
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Limited (up to $680 for 2026)
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Yes, fully
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Depends on employer design
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Portable after leaving job
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No
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Yes
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No
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2026 contribution limit
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$3,400 (health care FSA)
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$4,400 self-only / $8,750 family
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Set by employer
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FAQ
What is an FSA used for? An FSA is used to pay for eligible out-of-pocket medical, dental, vision, or dependent care expenses using pre-tax dollars deducted from an employee's paycheck.
What is the 2026 FSA contribution limit? The 2026 health care FSA contribution limit is $3,400 per employee, with a $680 carryover limit if the employer allows it.
Do FSA funds roll over? Only up to the carryover limit your employer allows, which is $680 for 2026. Any remaining balance beyond that is typically forfeited at the end of the plan year unless a grace period applies.
Can I have both an FSA and an HSA? Generally no, with one exception: a Limited Purpose FSA, which covers only dental and vision expenses, can be paired with an HSA.
We help employers design FSA offerings that actually get used, not forfeited. Want to see how your current plan compares? Let's talk.
About Bennie
Bennie is a modern employee benefits firm dedicated to transforming how employers design, manage, and deliver benefits. By combining world-class brokerage services with user-friendly technology, Bennie helps organizations lower costs and streamline administration while giving employees a centralized platform to navigate their healthcare. Headquartered in New York City, Bennie is licensed in all 50 states.
