Many employees who participate in a health flexible spending account plan wait until the end of the plan year to use their funds. While participants generally have a certain period of time after the end of the plan year to submit receipts for reimbursement, typically funds must be used within the plan year (or grace period) or the contributions are forfeited.
An expense must be for medical care to be reimbursed from a health flexible spending account plan. Each plan sets its own rules as to what may be eligible for reimbursement, but in all cases the expense must be medical as defined by IRS rules. The IRS considers medical care to be for the diagnosis, cure, mitigation, treatment or prevention of disease. Expenses that merely benefit general health do not meet the IRS requirement of medical care for health FSA reimbursement. The expense must be incurred because it is necessary to treat or alleviate a specific physical or mental illness. General expenses are not medical unless there is an existing or imminently probably disease, physical or mental defect or illness and the expense would not have been incurred but for the medical condition.
If an expense meets these requirements, it generally may be reimbursed from a health FSA, if permitted by the terms of the plan. Common reimbursable expenses include:
- hospital services
- nursing services
- medical, lab, surgical, dental and other diagnostic and healing services;
- x-rays;
- medicines and drugs;
- artificial teeth and limbs; and
- ambulance hire.
Many people who have funds remaining in a health FSA want to purchase eligible items at the end of the year to use up FSA funds. Eligible expenses may include:
- bandages;
- contact lens solution;
- allergy medicine;
- cold medicine;
- prescription glasses;
- sunscreen;
- menstrual products;
- acne medication;
- antacids;
- antibiotic ointment;
- diabetic supplies;
- pain relievers;
Employees with amounts remaining in their health FSAs should be reminded to use up the available funds by incurring expenses before the end of the plan year.
