Summary
- In this Issue Brief, we analyze EBRI’s Flexible Spending Account (FSA) Database to shine a light on these common but under-researched accounts.
- The average FSA contribution in 2023 grew to $1,413. Additionally, the vast majority — 88 percent — of accountholders took a distribution. Among those who did, the average distribution was $1,451.
- FSA contributions and distributions varied slightly conditional on whether the account had a grace period feature, allowed rollovers, or was a “use-it-or-lose-it” FSA. There was a roughly $200 difference between the average contribution levels for accountholders with the highest average contribution (“use-it-or-lose-it”) and the lowest average contribution (rollover). Further, there was a roughly $80 difference in the average distributions taken from these accounts.
- Forfeitures decreased slightly compared with 2022, which had marked a return to pre-2020 forfeiture rules. Roughly half of FSA accountholders forfeited funds to their employer in 2023, and the average forfeiture was $436.
- Accountholder age is strongly correlated with both contributions and distributions. Younger accountholders contributed less and were less likely to take distributions, and when they took distributions, they took smaller ones than their older counterparts. Younger workers were also more likely to forfeit funds back to their employer.
Flexible spending accounts (FSAs) are a useful way for workers to allocate and stretch health care spending dollars further than they otherwise could. Contributions to FSAs are made on a pretax basis, and distributions are tax-free as well, as long as distributions are spent on qualified medical expenses as defined by the IRS. These accounts are prevalent in the workplace; a survey conducted by the Bureau of Labor Statistics (BLS) in 2024 estimated that 72 percent of state and local government workers and 47 percent of private-sector workers had access to a health care flexible spending account. Access has grown since 2012, when 59 percent of state and local government employees and 36 percent of private-sector workers had access to an FSA.
However, there is little empirical evidence examining how workers use FSAs. To shed light on this well-known but under-researched segment of the benefits landscape, the Employee Benefit Research Institute (EBRI) established its FSA Database, which is now in its fourth year.