It’s no surprise that a medical expense like a dental exam can be paid or reimbursed under an HSA, but what did IRS recently say about nutritional supplements?
New guidance released March 17, 2023, sheds light on medical expenses related to nutrition, wellness and general health.
In fact, the frequently asked questions (FAQs) created by IRS apply to several types of tax-favored health plans. They are:
- health savings accounts (HSAs)
- health flexible spending arrangements (FSAs)
- Archer medical savings accounts (MSA), and
- health reimbursement arrangements (HRAs).
So, if your company offers employees these types of plans along with your group health plan – or may down the road – make sure you’re up-to-date on what’s allowed and what’s not. Here’s a rundown of the types of medical expenses covered in the FAQs:
Offering an HSA or other plan
As mentioned, the cost of a dental exam is a medical expense that can be paid or reimbursed under the tax-favored health plans. Same goes for an eye exam or a physical exam. (Q1, Q2, Q3)
The cost of a program to treat either a substance use disorder or an alcohol use disorder can also be paid or reimbursed, according to the FAQs. A smoking cessation program is viewed the same way. Such programs treat diseases, IRS explained. (Q4, Q5, Q6)
Let’s say an employee wants to be reimbursed for therapy. That depends. Therapy designed to treat a diagnosed mental illness is much different than marital counseling. The former is an allowed expense under an HSA, health FSA, Archer MSA or HRA – the latter isn’t. (Q7)
An employee may seek nutritional counseling. But if it’s not intended to treat a specific, physician-diagnosed disease – such as obesity or diabetes – then it’s not an allowed medical expense for purposes of the health plans. A weight-loss program is held to the same scrutiny. With this, IRS gives examples of diseases such as obesity, diabetes, hypertension and heart disease. (Q8, Q9)
As for gym memberships, the focus is on the “sole purpose” for buying the membership. If it’s to affect a function or structure of the body – e.g., physical therapy to treat an injury – or to treat a specific disease diagnosed by a physician, then the cost could be paid or reimbursed under an HSA or other tax-favored health plan. (Q10)
What if someone wants to take swimming or dancing lessons, for example? Exercise that’s for the improvement of general health can’t be paid or reimbursed under an HSA, health FSA, Archer MSA or HRA, according to the IRS guidance. (Q11)
The cost of food purchased for weight loss or other health reasons must meet three criteria to be considered a medical expense for purposes of the health plans. The criteria applies to beverages as well. The food and beverages:
- shouldn’t satisfy normal, nutritional needs
- should alleviate or treat an illness, and
- should be substantiated by a physician.
To determine the amount that can be paid or reimbursed, use this formula: the cost of the food or beverage minus the cost of a product that satisfies normal nutritional needs. (Q12)
Even though most over-the-counter drugs and menstrual care products can’t be deducted as a medical expense under Sec. 213 of the Internal Revenue Code (insulin is the exception), these medical expenses can be paid or reimbursed under an HSA, health FSA, Archer MSA or HRA. (Q13)
So, finally, what about nutritional supplements? Yes, expenses for nutritional supplements may be able to be paid under an HSA or other tax-favored health plan, but only if they’re recommended by a medical practitioner as treatment for a specific, physician-diagnosed medical condition, IRS said in its FAQs. (Q14)
Current HSA contribution limits
By way of reminder, here are the 2023 HSA contributions limits, which IRS announced in Revenue Procedure 2022-24. An individual with:
- self-only coverage can contribute $3,850, and
- family coverage can contribute $7,750.
When IRS updates those number for 2024, we’ll provide that information for you.
