Which statement describes the Health Savings Account (FSA) use-it-or-lose-it rule within the plan year?

• A. A FSA is portable and funds roll over year to year.
• B. A FSA is employer-established with use-it-or-lose-it funding within the plan year.
• C. A FSA always allows unlimited rollover of funds.
• D. A FSA is funded by tax-free contributions.

Answer: (B)

Flexible Spending Accounts follow a use-it-or-lose-it pattern: the money you contribute is intended to be spent on eligible medical expenses within the plan year, and any funds not used by the end of that period can be forfeited (though many plans offer a grace period or a small rollover). This setup is established by the employer and governs how the account operates.

That combination—employer-established and governed by a use-it-or-lose-it timing within the plan year—best matches how FSAs work. In contrast, Health Savings Accounts are portable and funds typically carry over from year to year, so they don’t fit the use-it-or-lose-it rule. Some plan details can add a grace period or a limited rollover for FSAs, but they don’t allow unlimited rollover.