IRS Provides Additional Detail on Definition of ‘Medical Care’ Expenses

Many individuals have chosen health plans associated with health savings accounts (HSAs), Flexible Spending Accounts (FSAs), or Health Reimbursement Accounts (HRAs) to help supplement their health insurance needs. Recently, the IRS shared an information letter that provided additional insight on what would qualify as a medical expense reimbursable from an HSA, FSA, or other tax-favored accounts. This letter came in response to the question of whether menstrual products qualified as a medical expense.

Medical Care Expense

Rather than answering the question regarding menstrual products, the IRS instead focused on discussing the broader question of what qualifies as a medical care expense. In Code §213, a medical care expense is defined as an amount paid for “the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting a structure or function of the body.” Further, medical care expenses must primarily either prevent or alleviate a physical or mental illness.

The IRS provides five factors to consider in determining whether a purchase is incurred for a qualifying reason. These factors include:

  • The motive or purpose of the expense;
  • Whether there is a physician-diagnosed medical condition where the physician has recommended the item for treatment or mitigation;
  • The relationship between the purchase and the illness;
  • The treatment’s effectiveness; and
  • The proximity between the onset or recurrence of the illness or problem and the purchase.

Under these new factors, a personal expense is considered a medical expense only if it is incurred due to illness or disease. General health expenses, or those that alleviate discomfort not connected to a disease or illness, do not qualify as a medical care expense. Expenses that are exclusively beneficial to general health and wellbeing are not considered qualified expenses.

While the IRS’s recent guidance does not change the current code on qualified medical care expenses, it does provide additional guidance for making decisions on these expenses. While no specific guidance was provided, it seems that outside of special circumstances, general menstrual care products are not an eligible expense. This may change in the future if legislation guides the IRS to include common wellness products in its qualified expenses category.

Plan administrators often must explain these nuances to plan participants and help them make determinations on whether purchases qualify as medical care expenses or not. The experienced ERISA attorneys at Hall Benefits Law provide backup for plan administrator when specific questions and situations don’t seem to fit the rules perfectly or another informed opinion is required. We help our clients set up and maintain their benefits plans, and we are here to answer simple questions and help handle the most complex problems or audits that arise. Call our office today at 678-439-6236, or visit the Hall Benefits Law website to learn more about our services.

The following two tabs change content below.

Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

Latest posts by Hall Benefits Law, LLC (see all)

%d bloggers like this: