March 11, 2024
By: Melanie N. Aska
On March 6, 2024, the IRS issued an alert warning taxpayers and health spending plan administrators not to be misled by some companies who are misrepresenting the circumstances under which general health and wellness expenses can be paid or reimbursed under health flexible spending accounts (FSAs), health savings accounts (HSAs), health reimbursement arrangements (HRAs) and medical savings accounts (MSAs).
Health FSAs, HSAs, HRAs and MSAs can only pay or reimburse expenses for “medical care,” as defined in IRC Section 213(d).
The IRS alert notes that some companies mistakenly claim that notes from doctors based merely on self-reported health information can convert non-medical food, wellness and exercise expenses into “medical care” expenses. The IRS alert states that a doctor’s note would not establish that an otherwise personal expense qualifies as a “medical care” expense, and includes the following helpful example:
Example: A diabetic, in his attempts to control his blood sugar, decides to eat foods that are lower in carbohydrates. He sees an advertisement from a company stating that he can use pre-tax dollars from his health FSA to purchase healthy food if he contacts that company. He contacts the company, who tells him that for a fee, the company will provide him with a “doctor’s note” that he can submit to his health FSA to be reimbursed for the cost of food purchased in his attempt to eat healthier. However, when he submits the expense with the “doctor’s note,” the claim is denied because food is not a medical care expense, and plan administrators are wary of claims that could invalidate their plans.
The IRS alert warns that health FSAs and other health spending plans that pay for, or reimburse, non-medical care expenses are not qualified plans. If the plan is not qualified, all payments or reimbursements made to taxpayers under the plan, even payments or reimbursements for actual medical care expenses, would be includable in income.
The IRS alert encourages taxpayers with questions to review the IRS’ frequently asked questions on medical care expenses related to nutrition, wellness and general health to determine whether a nutrition, wellness or general health expense qualifies as a “medical care” expense.
If you have any questions about this news alert, please contact Melanie N. Aska at maska@murthalaw.com or 617.457.4131.
Related Information
