Does FSA Cover Physical Therapy Expenses?

A Flexible Spending Account (FSA) serves as a tax-advantaged savings mechanism for healthcare expenditures. Individuals contribute pre-tax dollars from their salary into this account, which can then be used to cover eligible medical, dental, and vision costs. An FSA’s objective is to reduce an individual’s taxable income while providing a dedicated fund for out-of-pocket healthcare needs. This article clarifies the eligibility of physical therapy expenses for FSA coverage and outlines the necessary steps for reimbursement.

Physical Therapy Eligibility for FSA

Physical therapy is generally considered an eligible expense for FSA reimbursement when it is medically necessary and prescribed by a qualified healthcare professional. The Internal Revenue Service (IRS) defines qualified medical expenses as costs incurred primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. This broad definition encompasses rehabilitative services like physical therapy, which aims to restore function, improve mobility, and alleviate pain.

Physical therapy can address a wide range of medical conditions, making it a common eligible expense. Examples include rehabilitation following injuries such as sprains or fractures, post-surgical recovery, and managing chronic pain or musculoskeletal disorders. It also extends to therapy prescribed for neurological conditions, mobility issues, and recovery from events like strokes or cardiac episodes. Pediatric physical therapy for developmental delays also falls under eligible expenses.

It is important to distinguish medically necessary physical therapy from general wellness or fitness activities. Expenses for activities solely aimed at general fitness, athletic performance enhancement, or services not specifically prescribed by a medical provider are typically not eligible for FSA reimbursement. For instance, a gym membership or massage therapy not tied to a specific medical condition would not qualify. Eligibility requires a medical professional’s prescription or recommendation for a specific health condition or recovery need.

Documentation for Reimbursement

Proper documentation is essential for substantiating FSA claims and ensuring successful reimbursement. The IRS requires specific records to verify that expenses are legitimate qualified medical costs.

A key piece of documentation is a prescription or a Letter of Medical Necessity (LMN) from a physician or other licensed healthcare provider. An LMN is important for services not automatically recognized as eligible or to establish medical necessity. This letter should typically include the patient’s diagnosis, explain the specific need for physical therapy, and indicate the recommended duration of the treatment.

In addition to a prescription or LMN, individuals must obtain itemized receipts from the physical therapy provider. These receipts must contain specific information for the claim to be processed. The required details include the patient’s name, the name of the physical therapy provider, the exact dates of service, a clear description of the type of service received, and the out-of-pocket expense amount.

If insurance covered a portion of the expense, an Explanation of Benefits (EOB) from the insurance carrier is often recommended, showing the remaining balance. Keeping copies of all original receipts and supporting documents is advisable for personal records and potential IRS review.

Submitting Your FSA Claim

Once all necessary documentation has been gathered, there are typically two primary methods for utilizing FSA funds for physical therapy expenses. The most direct method involves using an FSA debit card at the point of service, if the physical therapy provider accepts it. This allows for immediate payment directly from the FSA funds.

Alternatively, if an FSA debit card cannot be used or if expenses were paid out-of-pocket, a manual reimbursement claim must be submitted. Obtain a claim form from the FSA administrator, often found on their online portal or through your employer’s human resources department. The completed claim form must then be submitted along with the required supporting documentation, such as the itemized receipts and any necessary prescriptions or Letters of Medical Necessity. Submission methods include uploading digital copies through an online portal or mobile application, or sending documents via mail or fax.

Most plans operate under a “use-it-or-lose-it” rule, meaning funds not used by the end of the plan year may be forfeited. Some plans offer a grace period, typically up to two months and 15 days into the new plan year, to incur expenses, or a run-out period, which is additional time (often 60 to 90 days) to submit claims for expenses incurred during the previous plan year.