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Wellness

Medical Expenses Related to Nutrition, Wellness, and General Health

The Baldwin Group
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Updated: April 24, 2024
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3 minute read

A recent bulletin from the IRS reminded taxpayers that certain personal health and wellness expenses may not be reimbursed via a health flexible spending account (FSA), a health savings account (HSA), a health reimbursement arrangement (HRA), or an Archer medical savings account (MSA). Incurred expenses related to certain therapies, including nutritional counseling and other weight-management related programming, may only be reimbursed with a qualifying account-based plan under certain regulatorily prescribed and situationally limited circumstances.

Employers should review the reimbursement requirements and applicable plan procedures, as maintained, and administered respecting the account-based plans they sponsor (or otherwise make available for enrollment). The best practice for employers sponsoring these account-based plans is careful contemplation respecting development of participant directed communications, reminding enrollees that plan-level reimbursements may not be made for individual expenditures that are deemed to be “merely beneficial” to the “general, overall health” of the enrollee.

To be sure, each expenditure that is contemplated for reimbursement under a qualifying account-based plan must adhere to the stringent eligibility and reimbursement guidelines administered by the Internal Revenue Service (in particular, the standards outlined in IRC Section 213(d). Employers that are unsure respecting the nature of reimbursement eligibility for any participant expenditure (or any class of expenditures), are reminded to consult with legal counsel and/or tax advisory professionals to confirm whether, and to what extent, such expenditure(s) are eligible for reimbursement via the underlying account-based plan..

Plan Sponsors and their enrollees are advised to carefully and routinely evaluate (and where appropriate, to audit) the reimbursement-related practices of the plan’s third-party administrators, insurers, vendors, and other professional service providers, so as to assure substantive compliance with the medical reimbursement guidelines, as enforced by the IRS.

Summary

In summary, certain generalized healthcare expenditures, particularly many arising in the wellness context (for example, nutrition-related counseling and certain diet-related participant education), may not qualify for reimbursement under the terms of a qualifying account-based plan. To that end, employers are cautioned to evaluate the underlying purpose and effect of healthcare related expenditures that are submitted for reimbursement by the plan’s participants. In particular, plan sponsors should carefully evaluate the propriety of plan-level reimbursement requests, always keeping the following guidance in mind:

  • The cost of nutritional counseling or a weight-loss program is a qualified medical expense only if it treats a specific disease diagnosed by a physician (such as obesity or diabetes);
  • The cost of nutritional supplements is a qualified medical expense only if the supplements are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a physician;
  • The cost of weight-loss food or beverages is a qualified medical expense only if the food or beverage does not satisfy normal nutritional needs, the food or beverage alleviates or treats an illness, and the need for the food or beverage is substantiated by a physician. The medical expense is limited to the amount by which the cost of the food or beverage exceeds that of a product that satisfies normal nutritional needs;
  • The cost of exercise for the improvement of general health, such as swimming or dance lessons, is never a qualified medical expense (even if recommended by a doctor); and,
  • The cost of a gym membership is a qualified medical expense 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 for the sole purpose of treating a specific disease diagnosed by a physician (such as obesity, hypertension or heart disease).

The IRS has authored additional agency guidance in the form of frequently asked questions related to certain healthcare reimbursements submitted under qualifying account-based plans (see:  here).

More information and resources related to the IRA’s changes to the Medicare Part D program are available on the CMS Part D Improvements webpage.


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