On March 6, 2024, the IRS issued an alert (IR-2024-65) to remind taxpayers and health spending plan administrators that personal expenses for general health and wellness are not considered medical care. Therefore, these expenses are not reimbursable through health FSAs, HRAs, HSAs, and MSAs.
As background, medical care expenses that are defined in Section 213(d) are generally eligible to be paid or reimbursed under health FSAs, HRAs, HSAs, and MSAs unless the expenses were reimbursed by an individual’s healthcare coverage (e.g., an employer-sponsored health insurance plan). Medical expenses under Section 213(d) are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease and for the purpose of affecting any part or function of the body. Further, medical expenses must be primarily to alleviate or prevent a physical or mental disability or illness and they exclude expenses that are merely beneficial to general health.
The IRS alert explains that some companies are misrepresenting the circumstances under which food (e.g., for weight loss) and wellness expenses can be paid or reimbursed under FSAs and other health spending plans using an example. These companies erroneously advertise that a doctor’s note based merely on self-reported health information can convert non-medical food, wellness, and exercise expenses into qualified medical expenses.
However, the IRS clarifies that such a doctor’s note does not satisfy the requirement that it be related to a targeted diagnosis-specific activity or treatment, and these types of personal expenses do not qualify as medical expenses. The IRS reminds plan administrators that FSAs and other health spending plans that pay for, or reimburse, non-medical expenses are not qualified plans. Accordingly, if the plan is not qualified, all reimbursements, even reimbursements for actual medical expenses, are includible in income. The IRS frequently asked questions outline whether certain costs related to nutrition, wellness, and general health are medical expenses.
Employers who sponsor health FSAs and other spending accounts should review their vendors’ current claim adjudication factors to ensure that non-medical expenses, such as personal general health expenses, are not reimbursed through health FSAs and other spending accounts. Additionally, it is important for employers to educate their employees regarding medical expenses related to nutrition, wellness, and general health to determine whether a food or wellness expense is a medical expense.
For further information about qualified medical expenses as defined in Section 213(d), please download copies of the PPI publications Qualified Medical Expenses and Quick Reference Chart: HSAs, Health FSAs, and Traditional HRAs.
IRS Alert: Beware of Companies Misrepresenting Nutrition, Wellness and General Health Expenses as Medical Care for FSAs, HSAs, HRAs and MSAs » IRS Frequently Asked Questions About Medical Expenses Related to Nutrition, Wellness, and General Health »