How to Help Your Employees Maximize Their FSA Benefits in 2026
The most effective way to help employees maximize their Flexible Spending Account benefits is through proactive education about the 2026 $3,400 contribution limit, strategic spending guidance, and timely year-end reminders. Companies that implement structured FSA education programs consistently see higher employee satisfaction and significantly fewer forfeited funds — yet most employers treat FSA communication as an afterthought during open enrollment.
This guide provides HR directors and benefits administrators with a complete framework for FSA employee education, from enrollment through year-end, with actionable strategies you can implement immediately.
What’s New with FSA Limits in 2026 (And Why Your Employees Need to Know)
The IRS increased the health FSA contribution limit to $3,400 for 2026, up from $3,300 in 2025 and $3,200 in 2024. This $200 increase over two years allows employees to shelter more income from federal income tax and FICA taxes, translating to real take-home pay improvements.
Here’s how the 2026 FSA landscape breaks down:
2026 FSA Limits at a Glance:
- Health FSA: $3,400 (up from $3,300 in 2025)
- Dependent Care FSA: $7,500 (increased from $5,000 — a significant jump)
- FSA Rollover Allowance: Up to $680 (if the employer’s plan allows)
- Grace Period Alternative: 2.5 months after plan year end (employer must choose rollover OR grace period, not both)
Tax Savings by Bracket on the $100 Increase Alone:
An employee in the 22% federal bracket saves an additional $22 in income tax on the $100 limit increase, plus $7.65 in FICA savings — roughly $30 more per year just from the limit bump. For employees in the 32% bracket, that’s nearly $40 in additional savings. Multiply that across your workforce and factor in the full contribution amount, and the tax savings become substantial.
The dependent care FSA increase to $7,500 is even more impactful. Employees with childcare expenses can now shelter an additional $2,500 from taxes compared to the old $5,000 limit — a potential tax savings of over $750 for families in the 22% bracket when including FICA.
How the Increase Affects Your Open Enrollment Communication
Start educating employees about 2026 limits well before open enrollment begins. Key action items include updating all enrollment materials with the $3,400 health FSA limit and $7,500 dependent care limit, highlighting the dollar increase in employee communications with specific savings examples, and calculating personalized projections for different salary levels using tools like the Benefits Genius FICA Calculator.
The Real Cost of Poor FSA Education
Poor FSA education costs the average employee $339 in forfeited funds annually and can reduce plan participation rates by up to 40%. The data paints a clear picture of why education matters.
The Forfeiture Problem:
Approximately 67% of FSA participants forfeit some portion of their contributions each year. The average individual forfeiture of $339 adds up to billions of dollars in lost employee savings annually across all employers. These are pre-tax dollars that employees elected to set aside for healthcare — money they earned but never used.
The Knowledge Gap:
Research consistently shows that only about 23% of employees understand the full range of FSA-eligible expenses. Nearly half don’t understand the difference between rollover and grace period options, and well over half don’t plan their FSA contributions strategically based on anticipated expenses.
This knowledge gap directly impacts your organization in several ways. Forfeited funds create a negative perception of the benefits package, even though the FSA itself is a valuable benefit. Employees who’ve been burned by forfeitures are less likely to participate in other voluntary benefits, and the overall impact on compensation satisfaction scores can ripple through retention and recruitment.
The solution isn’t complicated — it’s consistent, year-round education that meets employees where they are.
The Complete FSA Education Framework for HR Teams
Effective FSA education requires a four-phase approach: enrollment education, mid-year check-ins, spending guidance, and year-end urgency communication. Companies that implement this structured approach typically see meaningful reductions in forfeitures and increases in participation.
Phase 1: Enrollment Education (September–November)
This is your foundation. During open enrollment, provide employees with the tools they need to make informed FSA elections.
Essential Components:
An FSA Planning Worksheet helps employees estimate their annual healthcare spending based on last year’s actual expenses. Include categories like prescriptions, copays, dental work, vision care, and over-the-counter items to jog their memory about recurring costs.
A Salary Impact Calculator shows the real take-home pay difference at various contribution levels. When an employee earning $60,000 sees that contributing $2,000 to their FSA saves them roughly $590 in taxes (at the 22% bracket plus FICA), the benefit becomes tangible. The Benefits Genius Savings Estimator can help with these calculations.
An Eligible Expenses Guide should go beyond the basics. Most employees know about copays and prescriptions, but many don’t realize items like sunscreen, first aid supplies, and reading glasses qualify.
Use multiple communication channels — benefits fair presentations, one-on-one enrollment meetings, email series with planning tips, and always-available intranet resources.
Phase 2: Mid-Year Check-ins (June–July)
The mid-year point is when many employees lose track of their FSA spending pace. A simple balance reminder email in June or July can prevent December panic.
Send employees their current balance alongside their spending pace. If someone contributed $3,400 for the year and has only spent $800 by July, flag that they’re behind pace and may need to plan upcoming healthcare purchases. Suggest practical spending opportunities like scheduling overdue dental cleanings, ordering a year’s supply of contact lenses, or stocking up on eligible over-the-counter items.
If your plan allows mid-year adjustments due to qualifying life events, this is also a good time to remind employees of that option.
Phase 3: Strategic Spending Guidance (Year-Round)
Rather than one big push, weave FSA awareness into your regular employee communications throughout the year with seasonal reminders.
Seasonal FSA spending themes work well:
In January, encourage employees to use FSA funds for new year health checkups and annual physicals. Spring is ideal for allergy season preparation — antihistamines, air purifiers, and allergy testing are all eligible. Summer brings opportunities for sports physicals, back-to-school immunizations, and sun protection purchases. Fall is the time for flu shots, annual eye exams, and dental cleanings before year-end.
These short, timely reminders keep FSA spending top of mind without overwhelming employees.
Phase 4: Year-End Urgency (October–December)
This is where forfeitures are won or lost. A structured countdown campaign prevents the last-minute scramble — or worse, the forgotten balance.
Recommended timeline:
Start in October with a friendly first balance reminder and a list of commonly overlooked eligible expenses. In November, launch the formal “use it or lose it” campaign with specific spending suggestions tailored to remaining balances. December calls for weekly communications — at minimum, weekly reminders with countdown language and practical spending ideas. In the final week, daily reminders with specific, actionable suggestions (schedule that dental cleaning, order prescription sunglasses, stock up on first aid supplies) can save employees hundreds of dollars.
FSA Eligible Expenses Your Employees Don’t Know About
Most employees think of FSA-eligible expenses as doctor copays, prescriptions, and maybe dental work. But the list of qualifying expenses is far broader than most realize, and this knowledge gap is one of the biggest drivers of forfeitures.
Over-the-Counter Medications and Supplies: Pain relievers (Tylenol, Advil), allergy medications (Zyrtec, Claritin), digestive aids (Tums, Pepto-Bismol), first aid supplies (bandages, antiseptic, gauze), and cold/flu remedies all qualify. Since the CARES Act made OTC medications eligible without a prescription, this category alone can absorb hundreds of dollars.
Vision Care Beyond Exams: Reading glasses (including non-prescription), prescription sunglasses, computer glasses with blue-light filtering, contact lens solution, and eye drops are all eligible. An employee who wears contacts could easily spend $300-500 on supplies alone.
Preventive and Wellness Items: Sunscreen (SPF 15 or higher), thermometers, blood pressure monitors, pulse oximeters, and even some fitness-related items when prescribed by a doctor qualify for FSA reimbursement.
Specialized Equipment: Compression socks, back supports and braces, ergonomic supports, heating pads, and cold therapy wraps are eligible — items many employees purchase out of pocket without realizing they could use pre-tax dollars.
Family and Childcare Items: Breast pumps and supplies, baby health monitors, and childproofing items (when medically recommended) can be covered. For families with young children, these expenses add up quickly.
The “FSA Shopping List” Strategy
Consider creating seasonal shopping lists that employees can reference throughout the year. A winter list might include humidifiers, lip balm, and heating pads. Spring: allergy medications and air purifier filters. Summer: sunscreen, first aid kits, and insect bite treatment. Fall: flu shot reminders, hand sanitizer, and thermometers.
Making these lists available on your company intranet or sending them as part of your seasonal communications removes the friction of employees having to research eligible expenses on their own.
Rollover vs. Grace Period: Helping Employees Navigate Their Options
If your plan offers either a rollover or grace period provision, employees need clear guidance on how it works. Confusion about these options is one of the top reasons employees either over-contribute (fearing forfeiture) or under-contribute (not understanding the safety net).
Rollover allows up to $680 (2026 limit) to carry into the next plan year automatically. Unused funds above that amount are still forfeited. This option works best for employees with relatively consistent, predictable healthcare spending who want a small buffer without much active management.
Grace Period gives employees an additional 2.5 months after the plan year ends to spend their entire remaining balance on eligible expenses. This option suits employees with variable or seasonal healthcare needs, but it requires more attention — miss the deadline and everything remaining is forfeited.
Important: Employers must choose one or the other (or neither). They cannot offer both rollover and grace period for the same FSA plan.
Help employees understand which option your plan offers and what it means for their planning. If you offer rollover, emphasize the $680 limit so employees don’t assume their entire balance carries over. If you offer a grace period, communicate the exact deadline clearly and repeatedly as it approaches.
Technology and Tools That Make FSA Education Easier
Modern FSA administration platforms offer features that can dramatically reduce your HR team’s education burden while improving employee outcomes.
Mobile Apps with real-time balance checking, receipt upload via photo, and spending suggestions help employees stay engaged with their FSA throughout the year — not just during enrollment and year-end.
Automated Alerts for balance reminders, deadline notifications, and eligible expense tips take the manual communication burden off HR. When the system automatically reminds an employee that they have $800 remaining with two months left, that’s one fewer forfeiture you need to worry about.
Educational Content built into your benefits platform — expense guides, planning tools, video tutorials — gives employees self-service access to the information they need, when they need it.
Consider creating a centralized FSA Resource Hub on your company intranet. Include a quick-reference eligible expense database, contribution planning calculators, FAQs addressing common questions, and contact information for FSA support. This becomes the single source of truth employees can reference any time.
Measuring Success: FSA Education KPIs
Track these key metrics to understand whether your FSA education efforts are working and where to focus improvement.
Participation Rate tells you how many eligible employees are enrolling in the FSA. Industry baseline is 35-45%; well-educated workforces typically see 50-65% participation.
Average Contribution Amount indicates whether employees are confident enough in their understanding to contribute meaningful amounts. If most participants are contributing the minimum, education may not be effectively communicating the tax savings opportunity.
Forfeiture Rate is the most direct measure of education effectiveness. If more than 15% of participants are forfeiting funds, there’s a clear education gap. Strong programs bring this under 8%.
Employee Satisfaction with benefits, measured through annual surveys, captures the downstream impact of FSA education on overall benefits perception.
Collect this data annually and use it to refine your approach. Low participation suggests you need better awareness campaigns during enrollment. High forfeitures point to spending education gaps. Low satisfaction might mean your communications aren’t clear enough.
Common FSA Education Mistakes to Avoid
Only communicating during open enrollment. This is the most common mistake. By the time employees are making mid-year spending decisions, they’ve forgotten enrollment materials. Year-round communication is essential.
Generic, one-size-fits-all messaging. A 25-year-old single employee and a 45-year-old parent of three have very different FSA needs. Segment your communications by demographics and life stage when possible.
Focusing only on medical expenses. Many employees don’t realize dental, vision, OTC medications, and preventive items qualify. Broaden your eligible expense education beyond doctor visits and prescriptions.
No urgency around year-end deadlines. Hope is not a strategy for preventing forfeitures. A structured countdown campaign starting in October is essential.
Ignoring new hires who join mid-year. If your plan allows mid-year enrollment for new hires, make FSA education part of your onboarding process — don’t assume they’ll figure it out on their own.
Taking the Next Step
Effective FSA education doesn’t require a massive budget or dedicated staff. It requires a structured approach, consistent communication, and a genuine commitment to helping employees get the most from their benefits.
Start by assessing where your current FSA education stands against the framework outlined above. Identify the biggest gaps — whether that’s enrollment communication, mid-year check-ins, or year-end campaigns — and address them systematically.
Need help understanding how pre-tax benefits like FSAs fit into your company’s overall compensation strategy? Use our FICA Savings Calculator to see the employer-side tax savings, or explore our ROI Calculator to understand the full financial impact of a well-run Section 125 plan.
Disclaimer: This article is for educational purposes only and does not constitute tax, legal, or benefits advice. Consult qualified professionals for guidance specific to your situation.
