What Happens to Your FSA When You Leave a Job
A health FSA stops covering new expenses when your coverage ends, and the unused balance is forfeited unless you elect COBRA for the FSA itself.
Your health FSA stops paying for expenses incurred after your coverage ends. Notice 2013-71 forfeits any unused balance at termination, unless you elect COBRA continuation coverage for the FSA itself. Claims for earlier expenses usually survive.
The FSA deadline calculator works from a plan-year end. After a mid-year departure the date that governs new spending is your coverage-termination date instead, which your plan document names.
The date that matters is the coverage-termination date
Reimbursement is tied to coverage, not to the calendar. Prop. Treas. Reg. §1.125-6(a)(2)(i) requires that “the medical expenses reimbursed by an accident and health plan elected through a cafeteria plan must be incurred during the period when the participant is covered by the accident and health plan.”
The same paragraph fixes what “incurred” means: medical expenses “are incurred when the employee (or the employee’s spouse or dependents) is provided with the medical care that gives rise to the medical expenses, and not when the employee is formally billed, charged for, or pays for the medical care.”
Two consequences follow. Care received on or before your last covered day is claimable even if the bill arrives weeks later. Care received the day after is not, whatever the balance says.
The unused balance
Notice 2013-71 is direct: “Any unused amount remaining in an employee’s health FSA as of termination of employment also is forfeited (unless, if applicable, the employee elects COBRA continuation coverage with respect to the health FSA).”
That parenthesis is the whole of the exception, and it is worth reading closely, because it is also the answer to a question the internet usually gets wrong.
COBRA can apply to a health FSA
It can, and the regulations say so twice. Q&A-1 of 26 CFR §54.4980B-2 defines a group health plan to include health care provided “through a cafeteria plan (as defined in section 125) or other flexible benefit arrangement”. Prop. Treas. Reg. §1.125-6(a)(2)(i) confirms the effect from the other direction: “A participant’s period of coverage includes COBRA coverage.”
Q&A-8 then cuts the obligation down. If two conditions are met for a plan year — the health FSA’s benefits are excepted benefits under sections 9831 and 9832, and the maximum COBRA premium the plan may charge for a year “equals or exceeds the maximum benefit available under the health FSA for the year” — then two limits apply.
| Paragraph | What it limits |
|---|---|
| Q&A-8(d) | The plan “is not obligated to make COBRA continuation coverage available for any subsequent plan year” to someone whose qualifying event fell in this plan year |
| Q&A-8(e) | The plan need not offer COBRA at all unless the beneficiary “can become entitled to receive during the remainder of the plan year a benefit that exceeds the maximum amount” chargeable as premium for the rest of that year |
In plain terms: most health FSA COBRA offers run only to the end of the current plan year, and only where more money is left in the account than the remaining premiums would cost. Q&A-8(e) also lets the plan deduct claims you already submitted before the qualifying event when it does that arithmetic.
The premium arithmetic
Under Q&A-1 of 26 CFR §54.4980B-8, a plan may charge up to 102% of the plan's cost1 for COBRA coverage. For a health FSA the “cost” is essentially your own election, so continuing it means paying with after-tax money to reach money you set aside pre-tax.
Example. A hypothetical participant has $900 left and four months to run in the plan year. Continuing the FSA under COBRA costs four monthly premiums; whether that is less than $900 is the calculation Q&A-8(e) describes. The general COBRA framework — 60 days2 to elect, and federal coverage only at employers with 20 or more employees3 — is set out in COBRA versus the Marketplace and in the COBRA basics page.
What survives without COBRA
Your right to claim for expenses already incurred normally continues into the run-out period, recorded here as Set by your plan — often 60–90 days after the plan year ends4. That period is a plan-document term, so the deadline after a mid-year departure is the one thing to read out of your Summary Plan Description before your access to the portal ends.
A carryover is a different question. It moves money into a following plan year of a plan you no longer participate in, and Notice 2013-71 forfeits the unused balance at termination unless COBRA is elected.
A new employer’s FSA starts fresh
Notice 2012-40 addresses the section 125(i) salary-reduction limit directly: “an employee employed by two or more employers that are not members of the same controlled group may elect up to $2,500 (as indexed for inflation) under each employer’s health FSA.”
The indexed figure for a plan year beginning in 2026 is $3,4005, listed with its source on the health FSA limits page. Employers inside one controlled group share a single limit; unrelated employers do not.
Do I lose my FSA if I quit?
You lose the ability to incur new reimbursable expenses when your coverage ends, and Notice 2013-71 forfeits the unused balance at termination unless you elect COBRA for the health FSA. Expenses incurred while you were covered remain claimable through the plan’s run-out period.
Can I use my FSA after my last day?
Only for care you received on or before your coverage-termination date, or during COBRA coverage if you elect it. Prop. Treas. Reg. §1.125-6(a)(2)(ii) dates an expense to the day the care is provided, not the day you are billed or pay.
Can I keep a health FSA through COBRA?
Yes, where the plan is obligated to offer it. Q&A-8 of 26 CFR §54.4980B-2 limits that obligation to plan years in which more benefit remains than the premium for the rest of the year would cost.
How long does COBRA last for a health FSA?
Usually to the end of the plan year in which the qualifying event happened. Q&A-8(d) states that a health FSA meeting the two conditions “is not obligated to make COBRA continuation coverage available for any subsequent plan year” to that person.
Does my carryover survive if I leave?
Notice 2013-71 forfeits any unused amount remaining at termination of employment unless COBRA is elected, and a carryover is an unused amount. The plan document is what governs the mechanics in your case.
Can I contribute to a new employer’s FSA in the same year?
Yes, if the two employers are not in the same controlled group. Notice 2012-40 permits an election up to the indexed limit under each employer’s health FSA, so a mid-year move can mean two separate elections in one calendar year.
What happens to a dependent care FSA when I leave?
COBRA does not reach it. Q&A-1 of 26 CFR §54.4980B-2 defines a group health plan as one maintained “to provide health care”, and dependent care assistance is a different qualified benefit, covered on the dependent care FSA page.
Open the FSA calculator →Sources
- IRS Notice 2013-71, Internal Revenue Bulletin 2013-47 (forfeiture at termination of employment)
- 26 CFR §54.4980B-2, Q&A-1 and Q&A-8 — plans that must comply with COBRA, and health FSAs
- 26 CFR §54.4980B-8, Q&A-1 — the maximum COBRA premium
- Prop. Treas. Reg. §1.125-6(a)(2) — period of coverage and when expenses are incurred, Federal Register, August 6, 2007
- IRS Notice 2012-40, Internal Revenue Bulletin 2012-26 (the section 125(i) limit applies per employer)
Information, not advice. This is the reading version; the interactive calculator and the full page are at https://thresholds.pages.dev/fsa/leaving-your-job/.