Why do I get conflicting information about eligible FSA expenses?
November 18, 2015 12:14 PM   Subscribe

Why is it so difficult to determine which over-the-counter items are eligible for Flex Spending Accounts?

The administrator of my FSA includes a link to FSAstore.com, which provides a list of items that are eligible without a prescription. For example, it says I can buy bandaids and suncreen and get reimbursed. But when I do some research, I see that there are caveats. For example, some sites say that sunscreen is only allowed if you have a diagnosed condition that requires it. Or, for bandaids, you need to have an currently existing reason for needing them.

Is FSAstore.com just leaving out the caveats so I'll buy the products, and then it's my problem if I get rejected? Why would my FSA administrator point me to a site that is intentionally misleading me?

Or is it more that there are "rules" in place around these purchase, but nobody enforces them, and FSAstore knows that?
posted by diogenes to Health & Fitness (5 answers total) 3 users marked this as a favorite
I've personally used up my annual spend on things like first aid kits, sun screen, even a breast pump that I gave for a baby shower gift. I've never had anything questioned or kicked back for additional documentation.
posted by handful of rain at 12:27 PM on November 18, 2015 [1 favorite]

My FSA has specific rules on when those things will and will not be covered. For us, sunscreen is covered only if SPF 30 or higher and not in a dual purpose product, like makeup. I'd check specifically with your FSA administrator, who should have a list of allowable expenses on their website.
posted by notjustthefish at 12:35 PM on November 18, 2015

The problem is that there are certain items that are clearly allowed because they are itemized in a list provided by the IRS Publication 502 while other items are specifically forbidden. This allows coveage of bandages because they are clearly listed and prevents cough drops, which are specifically excluded.

To parse things in the grey area, the only guidance I've seen from the IRS is Notice 2010-59, which points out that items used in the "prevention of disease" are allowed whereas items used to treat disease without a prescription are not covered. This loose "prevention of disease" clause is used to cover suncreen -- some sites say only for SPF30+, some say only SPF15+ and some approve any sunscreen. The IRS has not clarified their position on sunscreen specifically, whereas they have specifically excluded items like vitamins, which are often used for "prevention of disease."

Welcome to our byzantine tax code. FWIW, your FSA administrator normally establishes their own rules based on their interpretation of the tax code. Technically, if they were wrong, you could compel them to follow the actual tax code in court, but obviously this is never going to happen.
posted by Lame_username at 12:38 PM on November 18, 2015 [2 favorites]

Because the funding in your Flexible Spending Account (FSA) is not taxed, there are a ton of rules put in place by the IRS that govern what FSA dollars can and cannot be used for. Generally, the rules are supposed to mean that you use FSA funds on 'medically necessary' expenses. In most (but not all) cases, routine maintenance and preventative care (vitamins that are not specifically prescribed, toothbrushes, etc) aren't considered 'medically necessary'.
posted by Kpele at 12:39 PM on November 18, 2015 [1 favorite]

The PPACA basically requires a prescription and/or a statement of need from a doctor for any over the counter purchases to be eligible. Also note that not all FSA providers are willing to deal with the added complexity of such items and may place additional restrictions on what can be eligible.

This reference from ADP does a good job explaining things. I used it at a former job that was supported by ADP and it pretty much mirrors the rules for my FSA at a major US corporation now.
posted by fief at 3:14 PM on November 18, 2015

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