Eligible and ineligible expenses under a flexible spending account
Coldwater, MI — November 13, 2017
As employers prepare for the busy open enrollment season, they often encounter questions about flexible spending accounts. Understanding the expenses that are eligible under a flexible spending account (FSA) can be complicated. The rules around health FSAs are different than those dictating eligible expenses under a health savings account (HSA) and health reimbursement account (HRA). Eligible expenses for health FSAs are split into 11 main categories: baby/child to age 13, dental, eyes, hearing, lab exams/tests, medications, medical equipment/supplies, obstetrics, practitioners, therapy, and medical procedures/services.
Under the baby/child to age 13 category, eligible expenses include items used to feed infants, such as prescribed specialty formula, breastfeeding supplies (breast pump), and lactation consultant services. As children get older, expenses include well baby and well child medical care as well as tuition for a specialized school or teacher for a learning disability.
Dental services include x-rays, dentures, bridges, exams, teeth cleaning services, extractions, fillings, oral surgery, orthodontia, and periodontal services. For eye care, eye exams, laser eye surgery, prescription sunglasses, radial keratotomy, eyeglasses, and contact lenses are eligible expenses. Under the hearing category, FSA funds can be used for exams and hearing aids and batteries. Blood tests, metabolic tests, body scans, cardiograms, lab fees, and x-rays are all eligible.
Insulin and prescription drugs, contraceptive devices, crutches, walkers, wheelchairs, nebulizers, oxygen, prosthetics, and syringes are eligible under an FSA. Orthopedic shoes, air purification equipment, exercise equipment, hospital beds, mattresses, and wigs may be eligible if prescribed for a specific health condition. Breast cancer patients can also use FSA funds to pay for post-mastectomy clothing.
For pregnancy and the post-partum period, eligible expenses include prenatal care, exams, treatment, and Lamaze classes. Services and treatments provided by an allergist, chiropractor, Christian Science practitioner, dermatologist, homeopathic physician, optometrist, osteopathic physician, psychiatrist, psychologist, or other type of physician are eligible.
Eligible expenses under the therapy category can vary, depending on whether the services have been prescribed to treat a specific health condition. For example, drug and alcohol addiction counseling, hypnosis, exercise programs, massage, weight loss programs, and smoking cessation programs must be prescribed by a physician. Occupational, speech, and physical therapy expenses are eligible. Marriage counseling services are not.
Medical procedures and services covered under an FSA include acupuncture, alcohol and substance abuse inpatient and outpatient treatment and care, ambulance services, fertility treatment, hospital services, immunizations, physical exams, reconstructive surgery, service animals, sterilization, and transplants. FSA funds can be used to purchase sunscreen and certain over-the-counter products, such as braces, bandages, supplements, medications, and first aid supplies. Some medications will require a prescription to be eligible.
Certain expenses are not eligible under an FSA. Cosmetic surgery, at-home drug tests, autopsies, certain baby care supplies (car seats, bottles, diapers, and bathing supplies), controlled substances obtained in violation to federal law, ear piercing, funeral expenses, gift cards, nail and skin care, personal care supplies, hair removal services, insurance premiums, cosmetics, tattoo removal, and veterinary care expenses are not eligible. Expenses previously reimbursed or reimbursed under another FSA are also not eligible.
A dependent care FSA is different from a health FSA. This type of FSA allows parents to set aside funds to pay for child care expenses incurred while the parent(s) is/are at work, looking for work, or at school. Eligible expenses under a dependent care FSA include preschool, summer day camp, day care, and before or after school programs. A dependent care FSA can also be used to pay for adult care expenses for adult dependents who are physically or mentally unable to care for themselves. Overnight camps are not eligible under a dependent care FSA.
Understanding what is eligible and what is not will help FSA account participants maximize the funds they have set aside while taking advantage of tax savings.
About Infinisource Benefit Services
Infinisource Benefit Services has been a leader in the COBRA and benefits administration industry since it started in 1986. Over the past 30 years, Infinisource Benefit Services has grown and expanded to include administration for COBRA, Flexible Spending Accounts, Health Savings Accounts and Health Reimbursement Arrangements. Over 10,000,000 COBRA notices have been generated without a single adverse judgment or penalty. Infinisource Benefit Services has also processed more than 7,500,000 FSA/HRA claims and that number continues to grow. With 30 years of experience comes a unique understanding of employers’ needs and how to best provide for those needs. For more information, visit www.infinisource.com.