May 11, 2023
The Internal Revenue Service (IRS) issued frequently asked questions (FAQs) on March 17, 2023 addressing whether certain costs related to nutrition, wellness, and general health are medical expenses under Section 213 of the Internal Revenue Code (IRC) that may be paid or reimbursed under a health savings account (HSA), health flexible spending account (FSA), Archer medical savings account (MSA), or health reimbursement arrangement (HRA).
Review the FAQs to re-familiarize when applicable nutrition, wellness, and general health costs are reimbursable medical expenses.
IRC §213 defines medical expenses as the costs of diagnosis, cure mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body. IRC §213 generally allows a deduction for expenses paid during the taxable year for medical care if certain requirements are met. Medical expenses must be primarily to alleviate or prevent a physical or mental disability or illness.
The FAQs include:
- Confirmation that the costs of dental, eye, and physical exams are medical expenses that can be paid or reimbursed by a health FSA, HSA, MSA or HRA because these exams diagnose whether a disease or illness is present.
- Confirmation that the costs of smoking cessation programs and programs that treat drug-related substance use disorder or alcohol use disorder are medical expenses that can be paid or reimbursed by a health FSA, HSA, MSA or HRA.
- Explanation that the cost of a therapy is considered a medical expense if the therapy treats a specific disease diagnosed by a physician (e.g., obesity or diabetes). This similarly applies for the costs for nutritional counseling and costs for weight-loss programs, which can be paid or reimbursed by a health FSA, HSA, MSA or HRA if the programs treat a specific disease diagnosed by a physician, otherwise they would not be a medical expense.
- Confirmation that the cost of a gym membership is considered a medical expense only if the membership was purchased for the sole purpose of affecting a structure or function of the body (e.g., a prescribed physical therapy plan to treat an injury) or for the sole purpose of treating a specific disease diagnosed by a physician (e.g., obesity, hypertension, or heart disease).
- Confirmation that the cost of exercise for the improvement of general health (e.g., swimming or dance lessons) are not consider medical expenses that can be paid or reimbursed by a FSA, HSA, MSA or HRA.
- Explanation that the cost of food or beverages purchased for weight loss or other health reasons qualifies as a medical expense that can be paid or reimbursed by an HSA, FSA, or HRA only if: (a) the food or beverage does not satisfy normal nutritional needs; (b) the food or beverage alleviates or treats an illness; and (c) the need for the food or beverage is substantiated by a physician. The FAQs note the medical expense is limited to the amount by which the cost of the food or beverage exceeds the cost of a product that satisfies normal nutritional needs.
- Explanation that costs of nutritional supplements are only considered medical expenses that can be paid or reimbursed by a FSA, HSA, MSA or HRA if the supplements are recommended by a medical practitioner for the treatment of a specified medical condition diagnosed by a physician.
- Confirmation that costs of over-the-counter (OTC) medicines and non-prescription drugs (except for insulin) can be paid or reimbursed by a health FSA, HSA, MSA or HRA even though these costs are not a deductible medical expense under IRC §213.
The latest IRS FAQs do not provide new information regarding the types when certain costs are considered medical expenses and may be paid or reimbursed under a health FSA, HSA, MSA or HRA. Nevertheless, employer plan sponsors may find the FAQs a helpful resource when fielding benefits administration and reimbursement questions from plan participants.
As these FAQs discuss reimbursable medical expenses under IRC §213, employer plan sponsors should not refer to these FAQs for questions related to “lifestyle spending accounts” (LSAs), post-tax funds provided by employers for well-being related activities and resources. For additional information about LSAs, see the Business Group’s article about LSAs and key considerations for designing incentive strategies.
If you have questions, comments, or concerns about these or other regulatory and compliance issues, please contact us.
We provide this material for informational purposes only; it is not a substitute for legal advice.