What happens to unused ICHRA funds at the end of the year?

Before understanding what happens to unused funds, it's helpful to know how ICHRA funds work: an ICHRA is a reimbursement arrangement, not a pre-funded account. Employers set an allowance, but money only flows to employees when they submit valid claims. For a full explanation, see: How do ICHRA funds work?

With that context, "unused funds" refers to allowance amounts that employees haven't claimed against—either because they didn't submit reimbursement requests, their premiums were less than their full allowance, or they didn't incur other eligible expenses.

Employer options for unused funds

When designing their ICHRA, employers choose one of the following approaches:

Rollover: Unused allowance carries forward into the next plan year, adding to the employee's available balance. Employers can allow full rollover or cap the amount that rolls over.

Forfeiture: Unused allowance expires at the end of the plan year and does not carry forward.

The rollover policy must be applied consistently across all employees within the same class and should be clearly documented in the ICHRA plan documents.

Important distinction: rollover vs. submission deadlines

Rollover policies apply to unclaimed allowance amounts, not to missed submission deadlines. If an employee incurs an eligible expense but fails to submit a claim within the plan's required timeframe (including any run-out period), that reimbursement opportunity is forfeited—even if the plan allows rollover. For details on submission timing, see: How long do employees have to submit ICHRA reimbursement claims?

Key considerations

For employers: Allowing rollover can be an attractive benefit feature that encourages participation, but it also means potential liability carries forward. Forfeiture provides cleaner year-end accounting and more predictable costs.

For employees: Understanding both the rollover policy and claims submission deadlines helps with planning. Employees should submit claims regularly to avoid missing reimbursement opportunities.