How to Claim FSA Money for Eligible Expenses

Flexible Spending Accounts (FSAs) let employees set aside pre-tax money for healthcare expenses, reducing taxable income. Many people lose out on these benefits due to confusion about the reimbursement process or missed deadlines. Understanding how to submit claims properly ensures you maximize your FSA funds.

Eligible Expenses for Reimbursement

FSAs cover a range of medical, dental, and vision expenses, but not all healthcare costs qualify. The IRS defines eligible expenses under Section 213(d) of the Internal Revenue Code, which includes costs for diagnosing, treating, or preventing disease, as well as medical equipment and supplies. Common reimbursable expenses include copayments, deductibles, prescription medications, and necessary medical procedures not covered by insurance.

The CARES Act expanded eligibility to include over-the-counter medications without a prescription and menstrual care products. Pain relievers, allergy medications, and first-aid supplies now qualify, along with medical devices such as blood pressure monitors, thermometers, and orthopedic supports.

Vision and dental expenses are also covered. Prescription eyeglasses, contact lenses, and eye exams qualify, along with dental cleanings, fillings, and orthodontic treatments like braces. Some elective procedures, such as LASIK surgery, may be reimbursed if deemed medically necessary, but cosmetic treatments like teeth whitening are not covered.

The Filing Process

Employees submit claims through their plan administrator via an online portal, mobile app, or paper form. The process involves selecting the expense type, entering the amount paid, and uploading supporting documents. Many administrators offer direct deposit for faster reimbursements.

Some employers provide FSA debit cards, allowing direct payment for eligible expenses. However, purchases may still require verification. If flagged, the administrator may request additional documentation to confirm eligibility. Failure to provide proof could result in the amount being reported as taxable income.

Certain FSAs offer automatic claims submission, where expenses processed through an employer-sponsored insurance plan are forwarded for reimbursement. This feature is helpful for recurring costs like copayments but does not apply to all expenses, so employees should monitor their accounts and submit claims for out-of-pocket costs not captured.

Required Documentation

Proper documentation is essential for claim approval. Employees must provide an itemized receipt or an explanation of benefits (EOB) statement, which must include the provider’s name, date of service, a description of the product or service, and the amount paid. Generic credit card statements or non-itemized invoices are insufficient.

For medical services, invoices must distinguish between covered and non-covered charges. If a procedure could be considered elective, a letter of medical necessity (LMN) from a licensed physician may be required, explaining why the treatment is essential.

Dependent care FSAs, which cover childcare or eldercare expenses, require additional verification. Invoices must include the caregiver’s name, address, and tax identification or Social Security number. If care is provided by an individual rather than a licensed facility, the IRS may require further proof of payment, such as a signed statement from the caregiver.

Submission Deadlines

FSA funds must be used within the plan year or are forfeited. Many employers offer either a grace period—typically until March 15 of the following year—or a carryover option, allowing up to $640 (as of 2024) to roll over. Employers cannot offer both, so employees should check their plan’s policy.

Most plans provide a run-out period, usually 60 to 90 days after the plan year ends, during which employees can file reimbursement requests for expenses incurred before the deadline. This period does not extend the time to incur new expenses—only to submit claims for eligible costs already paid.

Handling Remaining Balances

Employees should monitor their FSA balance throughout the year to avoid forfeiting unused funds. If a significant balance remains near year-end, purchasing eligible medical supplies, scheduling routine exams, or prepaying for upcoming treatments can help maximize the use of available funds. Since FSA rules prohibit withdrawing funds for non-medical purposes, strategic planning is necessary.

If the plan includes a carryover provision, up to $640 can be rolled into the next year, but any amount above this limit is forfeited. For those with a grace period, eligible expenses incurred within the extension window can still be reimbursed, but once the grace period expires, any remaining funds are lost.

Amendments to Claims

Errors in FSA claims can often be corrected, depending on the plan administrator’s policies and the timing of the request. If a claim is denied due to missing documentation or incorrect information, employees are typically allowed to resubmit with the necessary details. This may involve providing a corrected receipt, an additional letter of medical necessity, or clarifying the nature of the expense. Claims that do not meet eligibility requirements cannot be reimbursed, even if resubmitted.

If an employee submits a duplicate claim or requests reimbursement for an incorrect amount, most administrators allow adjustments before processing. However, once funds have been disbursed, reversing a claim can be more complicated. Some plans require employees to return excess funds, while others deduct the overpayment from future reimbursements. Keeping accurate records and reviewing submissions before finalizing them can help prevent errors.