Use it or lose it: End of year employee benefits guide

Money, Rights

When it comes to the end of the year, many U.S. workers lose accrued benefits because they failed to use them by the Jan. 1 deadline. 

Which healthcare benefits are ‘use it or lose it’?

“Use it or lose it” policies vary from state to state and employer to employer.

Niosha N. Shakoori, who runs a human resources consulting firm in California, says many of these kinds of policies are unlawful in her state. “In California,” she says, “if you have accrued the vacation time/PTO, you can never lose it.” As for healthcare accounts, she says that health savings accounts, or HSAs, rollover, but flexible spending accounts typically do not.

Many employers offer another type of health benefit for employees called a health reimbursement arrangement, or HRA, and according to the IRS, unused funds can be carried over into the next year. With an HRA, employers do not pay for health services through the plan. Instead, they reimburse employees for medical expenses.

Vacation and voluntary benefits 

Eric Rothstein, an attorney in New York City, says vacation time is often “use it or lose it,” as is medical paid leave with pretax dollars.

Some companies also have deadlines for making end-of-year time-off requests. If you miss the deadline, you miss the leave, and in a “use it or lose it” situation, you’ll lose that time off.

Some employers allow employees to rollover leave into the next year, but some policies stipulate that you use the rollover days by mid-year. For instance, rollover days must be used by the end of the first quarter.

401k, sick days and deductibles 

Joseph Campagna III, an online human resources consultant in New York, suggests that if you are thinking about increasing contributions to your 401k, you should do so before the end of the year to account for those increases in this tax year.

While sick days are typically not allowed as a rollover option, employees should avoid the unprofessional move of scrambling to use all remaining sick days at the end of the year. “It can hurt your standing with your employer,” says Campagna.

Healthcare deductibles, which can include copayments, typically restart at the beginning of each year. Campagna recommends getting medical checkups or other visits taken care of before Jan. 1, when the deductible amount resets.

When it comes to “use it or lose it” policies regarding employee benefits, your best bet is to ask your employer. If your company has a human resources department, start there. Otherwise, ask your manager or supervisor.