03/17/2017

What expenses can be reimbursed from a Health Flexible Spending Account?

Health Flexible Spending Accounts (FSAs) are a popular benefit offered by employers to help employees pay for out of pocket medical expenses. A very common question employers and employees may both have is what expenses can be reimbursed from the plan.  There are several general guidelines for what makes an expense eligible for reimbursement from the plan.

1. The expense must be for medical care.

According to IRS Code Section 213(d), the expense must be “for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.” Essentially, the expense has to be for medical care and not for general health and well-being or cosmetic purposes.

Examples of eligible expenses include medical co-pays, medical deductible and medical coinsurance expenses. Additionally, prescriptions, eye exams, dental cleanings and x-rays are also eligible for reimbursement from a health FSA.

2. The expense is for the employee, their spouse, or their dependent(s).

The health FSA can reimburse expenses for the employee, their legal spouse and their dependents. The definition of dependents includes children through the age of 26 regardless of whether or not they are being claimed on the employee’s taxes.  While most plans allow for the reimbursement of expenses for the employee’s spouse and dependents, plans can be designed to limit those covered by the plan.

3. The date of service for the expense occurs during the plan year.

Claims are reimbursed based on the date of service and not the date of payment or the date the bill is received. This is important to remember for those expenses which occur right at the end of the plan year and the bill for the service is not received until the new plan year. If the date of service is before the plan year begins, the expense cannot be reimbursed from current plan year funds.

4. The expense has not been reimbursed from another plan.

There is no rule prohibiting spouses from each having a health FSA with their respective employers. However, the same expense cannot be reimbursed from both plans.  Also, any amounts reimbursed or paid through insurance are not eligible for reimbursement from a health FSA.

While there is not an exhaustive list of every eligible expense that can be reimbursed from a health FSA, understanding the basic rules can help employees plan ahead for the year when making their elections and submitting claims for reimbursement.

BusinessPlans, Inc. – myCafeteriaPlan does not intend to provide legal or tax advice and information contained in this article should not be interpreted as such. Regulations governing pretax plans are often open to interpretation and should be reviewed with your legal or tax advisor before making any decisions regarding your plan.