IRS FAQs Explain When Health FSAs, HSAs, or HRAs Can Reimburse Nutrition, Wellness, and General Health Expenses

IRS FAQs Explain When Health FSAs, HSAs, or HRAs Can Reimburse Nutrition, Wellness, and General Health Expenses

The IRS has issued FAQs that explain when certain costs related to nutrition, wellness, and general health are medical expenses under Code § 213 that may be paid or reimbursed under a health FSA, HSA, or HRA. As background, Code § 213 defines medical care as amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting a structure or function of the body. The FAQs explain that medical expenses must be primarily to alleviate or prevent a physical or mental disability or illness, and do not include expenses that are merely beneficial to general health. 

The FAQs confirm that the costs of dental, eye, and physical exams are medical expenses that can be paid or reimbursed by a health FSA, HSA, or HRA because these exams diagnose whether a disease or illness is present. The costs of smoking cessation programs and programs that treat drug-related substance use or alcohol use disorders are also medical expenses because they treat a disease. For the cost of therapy to be a medical expense, the therapy must treat a disease—thus, amounts paid for therapy to treat a diagnosed mental illness are medical expenses, while amounts paid for marital counseling are not. Likewise, the costs of nutritional counseling and weight-loss programs are medical expenses only if the counseling or program treats a specific disease diagnosed by a physician (e.g., obesity or diabetes); otherwise, these costs are not medical expenses. The cost of a gym membership is 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 plan for physical therapy to treat an injury) or treating a specific disease diagnosed by a physician (e.g., obesity or heart disease). However, the cost of exercise for the improvement of general health is not a medical expense, even if recommended by a doctor. 

The FAQs also explain the circumstances under which the cost of food or beverages purchased for weight loss or other health reasons will qualify as medical expenses, and that the cost of non-prescription drugs can be paid or reimbursed by a health FSA, HSA, or HRA even though these items (except for insulin) are not deductible under Code § 213. The FAQs confirm that the cost of nutritional supplements is not a medical expense unless the supplements are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a physician. 

Source: Thomson Reuters 

IRS FAQs Explain When Health FSAs, HSAs, or HRAs Can Reimburse Nutrition, Wellness, and General Health Expenses

What do all these employee benefit acronyms stand for?

Everyone in the employee benefits field uses acronyms like COBRA, FSA, and CDHC. What do these and other employee benefit acronyms stand for? 

Here’s an explanatory list of common employee benefit acronyms used:

ACA – Patient Protection and Affordable Care Act 

AHP – Association Health Plan 

ASG – Affiliated Service Group 

ASO – Administrative-Services-Only 

ATIN – Adoption Taxpayer Identification Number 

BA – Business Associate 

CDHC – Consumer-Driven Health Care 

CE – Covered Entity 

COB – Coordination of Benefits 

COBRA – Consolidated Omnibus Budget Reconciliation Act 

COLA – Cost-of-Living Adjustment 

CONUS – Continental United States 

DCAP – Dependent Care Assistance Program 

DOL – Department of Labor 

EIN – Employer Identification Number 

EAP – Employee Assistance Plan 

EBHRA – Expected Benefit HRA 

EBSA – Employee Benefits Security Administration 

EEOC – Equal Employment Opportunity Commission 

EFAST2 – ERISA Filing Acceptance System II 

EOB – Explanation of Benefits 

EOI – Evidence of Insurability 

ePHI – Electronic Protected Health Information 

ERISA – Employee Retirement Income Security Act 

FICA – Federal Insurance Contributions Act 

FLSA – Federal Labor Standards Act 

FMLA – Family and Medical Leave Act 

FSA – Flexible Spending Amount 

FUTA – Federal Employment Tax Act 

GHP – Group Health Plan 

HCE – Highly Compensated Employee

HCP – Highly Compensated Participants 

HDHC – High Deductible Health Coverage 

HDHP – High Deductible Health Plan 

Health FSA – Health Flexible Spending Arrangement 

HHS – Department of Health and Human Services 

HIPPA – Health Information Technology for Economic and Clinical Health Act 

HMO – Health Maintenance Organization 

HRA – Health Reimbursement Arrangement 

HSA – Health Savings Account 

ICHRA – Individual Coverage HRA 

IIAS – Inventory Information Approval System 

MCC – Merchant Category Code 

PBM – Pharmacy Benefit Manager 

PCOR Fees – Fees for Patient-Centered Outcomes Research 

PEO – Professional Employer Organization 

POP – Premium-Only Plan 

PPO Plan – Preferred Provider Organization Plan 

QB – Qualified Beneficiary 

QE – Qualifying Event 

QMCSO – Qualified Medical Child Support Order 

QSEHRA – Qualified Small Employer Health Reimbursement Arrangement 

R&C – Reasonable and Customary 

RRE – Responsible Reporting Identity 

SBC – Summary of Benefits and Coverage 

SMM – Summary of Material Modification 

SPD – Summary Plan Description 

TPA – Third Party Administrator 

UCR Rate – Usual, Customary, and Reasonable Rate 

VEBA – Voluntary Employees’ Beneficiary Association 

IRS FAQs Explain When Health FSAs, HSAs, or HRAs Can Reimburse Nutrition, Wellness, and General Health Expenses

3 ways to access HRA funds

As many know, a Health Reimbursement Arrangement (HRA) is an employer-funded account that helps pay for a medical plan’s deductible and co-insurance expenses. There are three ways to access an HRA. Here they are as follows.

  1. Filing an electronic claim: this can be submitted by signing into your NueSynergy account.
  2. Filing a paper claim: a paper claim along with a copy of Explanation of Benefits (EOB) can be emailed to NueSnergy. A paper claim can be obtained by signing into your NueSynergy account or by calling NueSynergy’s customer service team (855-890-7239).
  3. Providing documentation: A copy of your EOB from your insurance company is required to approve any claim for reimbursement.

For more information on accessing HRA funds and about this account in general, check out this handout.

IRS FAQs Explain When Health FSAs, HSAs, or HRAs Can Reimburse Nutrition, Wellness, and General Health Expenses

What employers should know about HRAs

Two months ago, NueSynergy wrote about several Health Reimbursement Arrangement (HRA) FAQs to keep in mind. Now, taking it a step further, NueSynergy will discuss what employers, specifically, should look for in regard to an HRA. Here it is as follows:

An HRA can be paired with any health plan with no limitations

This means that high-deductible health plans (HDHPs) are not required in order to offer this account.

What happens to the funds if my employee leaves the company?

HRA funds are not portable. Therefore, if any funds become unused then any remaining amount returns to you (employer).

An employer can only contribute funds to an HRA

This also means that owners and partners cannot participate in this account. Per IRS guidelines, anyone with two percent or more ownership in a schedule S corporation, LLC, LLP, sole proprietorship, or partnership may not participate. If you would like to provide an opportunity for your employee to save for additional medical expenses tax-free, then suggest them to enroll in a Flexible Spending Account (FSA).

As an employer, can I choose proration for new hires and family status change?

Yes. You can prorate contributions as long as it occurs throughout the year.

When does an HRA begin paying for an employee’s expenses?

An employer can either allow an HRA to pay before the employee meets any deductible, or it can be set up so that the employee has to meet a certain amount of out-of-pocket expenses before the HRA begins to pay.

IRS FAQs Explain When Health FSAs, HSAs, or HRAs Can Reimburse Nutrition, Wellness, and General Health Expenses

FAQs associated with SIHRAs

Back in the spring, NueSynergy wrote about the basics of a Spousal Incentive Health Reimbursement Arrangement (SIHRA). Now, as the year closes, NueSynergy is excited to list off many frequently asked questions (FAQs), associated with this account. Here they are as followed:

How does a SIHRA work and how is it beneficial?

A SIHRA’s goal is to offer an employee’s spouse the opportunity for full coverage on eligible health expenses without the hassle of co-pays, coinsurance, and deductibles. This is all possible if an employee is part of a company’s group health plan. Once that’s established, then an employee can simply elect their spouse and/or dependent(s) to the plan. This allows their spouse to become incentivized through a SIHRA if he/she has access to a group health plan through their employer or a different organization.

When does enrollment start?

Enrollment takes place either within 30 days of a qualifying event, during the spouse’s annual open enrollment window or once a new employee is eligible for benefits.

What’s the enrollment process?

The process is as follows:

  • Employee elects coverage for themselves (or employee + dependent) on employer-sponsored group health plan
  • Employee’s spouse enrolls in his/her qualified alternate group health plan
  • Employee (or their spouse) completes SIHRA enrollment and attestation e-forms via the online benefit administration system and provides proof of premium contribution paid for alternate group plan coverage

How to complete SIHRA enrollment?

In order to complete enrollment, a spouse is required to provide:

  • Proof of paid premium contribution: paystub showing premium contribution amount (pre or post tax)
  • Plan details indicating the cost of each coverage tier (not required if the entire family is enrolling)

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