Seyfarth Synopsis: New IRS FAQs provide helpful clarifications on eligible medical expenses for HSAs, FSAs, MSAs, and HRAs (including the conditions for reimbursement of those gym memberships).
On March 17, the Internal Revenue Service (IRS) posted a new set of Frequently Asked Questions (FAQs) aimed at individual taxpayers, addressing whether certain medical expenses related to nutrition, wellness, and general health may be paid or reimbursed from health savings accounts (HSAs), health flexible spending arrangements (FSAs), Archer medical savings accounts (MSAs), and health reimbursement arrangements (HRAs) (collectively, “Accounts”).
Notably, the list of eligible expenses differs slightly from the medical expenses that are deductible by a taxpayer under Section 213(d) of the Internal Revenue Code (Code). Although Internal Revenue Service (IRS) Publication 502, Medical and Dental Expenses addresses the deductibility of various medical and dental expenses, it may not be relied upon for answers to all questions regarding eligible Account expenses. Therefore, these FAQs specifically addressing Account-eligible expenses are particularly helpful to individual taxpayers who are Account holders, and to the benefits practitioners who respond to their questions. (Additional information about these Accounts also may be found in IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.)
The FAQs reiterate the definition of medical expenses found in Publication 502 and in Code § 213(d):
“Medical expenses 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. These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes.”
In addition, “[medical] expenses must be primarily to alleviate or prevent a physical or mental disability or illness” rather than being “merely beneficial to general health.”
The FAQs then provide the following specific guidance on whether various expenses are eligible for payment or reimbursement from Accounts.
What should you do with this new guidance? Because each of these FAQs is dated, we suspect (and hope) that this is a page that the IRS intends to maintain, and so we suggest a bookmark to this page for your reference and to watch for future developments. We also suggest including a link to these FAQs in your summary plan descriptions (SPDs) and other plan communications in which any of these Accounts are discussed. You might also confirm with your Account service providers that the information provided in these FAQs is consistent with their administration.
