Using FSA Funds After Termination

Can I use my FSA funds on items or services purchased after my last day of work? 

Unfortunately, after you leave your employer for any reason, you are unable to use the funds in your account for any expenses or services purchased after your last day of work. This is a rule established by the IRS and we are not able to change it.

When you enroll for an FSA, there are important IRS rules to keep in mind.

• An FSA is a use-it-or-lose-it account. This means that the remaining balance cannot be used for items or services purchased after your last day of employment. For this reason, the benefits card is inactivated after your last day of employment. 
• FSAs are pre-funded by your employer. This means that on the first day of the plan year, the full annual election amount is available to use.
• At each pay period, funds are withheld from your paycheck to make FSA contributions that will total the annual election by the plan end date.
• Contributions are discontinued after your last day of employment. This means you are not required to make contributions to total your disbursements. By enrolling in an FSA, both you and your employer agree that if you use the full annual election by your last day of employment, you are not required to contribute the remainder of the annual election back. After the last day of employment, there may be one more payroll contribution from the employee's paycheck as they end their time with the employer but this final contribution amount will not be more than the normal contribution amount.  

How can I access my FSA funds after termination?

If your benefits have been terminated and you still have money in your FSA, there are a few ways to use the funds. You still have access to the full annual election.  

1. Submit Claims

You can still submit claims for any eligible items or services that you paid for out-of-pocket during your time of employment and before your termination date. Your online account will list a specific start date of the current year and a termination date.

The claim must be submitted before the end of the required time period to submit a claim. Some employers allow a claim to be submitted through the run-out period after the end of the plan year. Some employers only allow a set amount of days after the date of termination. To find the specific plan details you can check your online account or contact the Rocky Mountain Reserve customer service team. 

2. Continue Your FSA Through COBRA

You may be eligible to continue using the FSA for services beyond the termination date if you are eligible to continue the FSA through COBRA. For more information, please visit the Health FSA and COBRA article.

Under COBRA, you may elect to continue participating in the Health FSA through the end of the year. If you elect COBRA:

• You may incur expenses through the end of the year.
• You may submit claims for those expenses through the end of the run-out period after the end of the year.
• You must elect for COBRA and make COBRA Health FSA contributions each month equal to the amounts they were contributing through their payroll withholding.

If you do not elect COBRA, any expenses incurred after the date of termination will not be reimbursed.

What happens to my unused FSA funds?

The funds that you don't use get forfeited to the employer. The employer pre-loaded the account at the beginning of the plan year before any contributions were made. After termination you are no longer responsible for paying the rest of your payroll contributions.