The Internal Revenue Service (IRS) posted FAQs[1] on March 17, 2023 addressing whether certain costs related to nutrition, wellness, and general health are medical expenses that may be paid for or reimbursed under employer-sponsored account-based plans such as a health savings account (HSA), health flexible spending arrangement (FSA), Archer medical savings account (Archer MSA) or health reimbursement arrangement (HRA).
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.”[2] These expenses include payments for medical services rendered by physicians, surgeons, dentists, and other medical practitioners as well as the costs of equipment, supplies, and diagnostic devices needed for these services. Additionally, these expenses include the costs of drugs and medicines prescribed by a physician. Importantly, medical expenses must pertain to the alleviation or prevention of a physical or mental disability or illness. They do not include expenses that are merely beneficial to general health or for general wellness or nutritional value.
Generally, a deduction is allowed for expenses paid during the taxable year for medical care if certain requirements are met. Alternatively, medical expenses are eligible to be paid for or reimbursed under an HSA, FSA, Archer MSA, or HRA.
Section 213 of the Internal Revenue Code generally allows a deduction for expenses paid during the taxable year for medical expenses if certain requirements are met. Expenses for medical care under Section 213 also are eligible to be paid for or reimbursed under an HSA, FSA, Archer MSA, or HRA. However, if any amount is paid for or reimbursed under an HSA, FSA, Archer MSA, or HRA, a taxpayer cannot also deduct the amount as a medical expense on the taxpayer's federal income tax return (“double-dipping” not allowed).
These FAQs address issues such as whether the cost of nutritional counseling, weight-loss programs, gym memberships, and treatment for substance use disorders are considered medical expenses that may be paid for or reimbursed under an HSA, FSA, Archer MSA, or HRA.
See the table below detailing the IRS FAQs guidance:
|
Item Description |
Can be paid or reimbursed by an HSA/FSA/HRA/Archer MSA? |
|
Nutritional counseling |
Yes, but only if it treats a specific disease diagnosed by a physician, such as obesity or diabetes. |
|
Weight-loss program |
Yes, but only if the program treats a specific disease diagnosed by a physician, such as obesity, diabetes, hypertension, or heart disease. |
|
Gym membership |
Yes, but only if the membership was purchased for the sole purpose of affecting a structure or function of the body, such as a prescribed plan for physical therapy to treat an injury, or the sole purpose of treating a specific disease diagnosed by a physician, such as obesity, hypertension, or heart disease. |
|
Exercise for improvement of general health, such as swimming or dancing lessons |
No. Even if recommended by a physician, it is only for improvement of general health. |
|
Food or beverages purchased for weight loss or other health reasons |
Yes, but only if:
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. If any of the three requirements is not met, the cost of food or beverages is not a medical expense. |
|
Nonprescription (over-the-counter) drugs and medicines |
Yes, including over-the-counter drugs and menstrual care products. |
|
Nutritional supplements |
Yes, but only if the supplements are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a physician. |
|
Substance/alcohol abuse disorder treatment |
Yes, because the program treats a disease, such as alcohol/substance use disorder. |
|
Smoking cessation program |
Yes, because the smoking cessation program treats a disease, such as tobacco use disorder. |
|
Physical, dental, or eye exams |
Yes, because the exam provides a diagnosis of whether a disease or illness is present. |
|
Therapy session |
Yes, if the therapy is treatment for a disease. For example, an amount paid for therapy to treat a diagnosed mental illness is a medical expense, but an amount paid for marital counseling is not. |
Employers are advised to be aware of this updated guidance with respect to payable or reimbursable expenses under an HSA, FSA, Archer MSA, or HRA. Employers are encouraged to ensure that their FSA/HSA/HRA administration vendors are processing and adjudicating claims for nutritional counseling and supplements, weight-loss programs, gym memberships, as well as substance use disorders properly in accordance with this recent FAQ guidance.
Contact your Risk Strategies representative for assistance or contact us directly at benefits@risk-strategies.com.
[1] These FAQs are part of the National Strategy on Hunger, Nutrition and Health, a roadmap of actions the federal government will take to end hunger and reduce diet-related diseases by 2030.
[2] Section 213(d)(1)(A) of the Internal Revenue Code.