Is Counseling an FSA-Eligible Expense?

Flexible Spending Accounts (FSAs) offer a tax-advantaged way to pay for certain healthcare expenses. These accounts allow individuals to set aside pre-tax money from their salary to cover qualified medical costs throughout the plan year. This article clarifies the eligibility of various counseling services under FSA guidelines.

Understanding FSA Eligibility for Medical Care

The Internal Revenue Service (IRS) defines what constitutes an eligible medical expense for FSA purposes. According to Internal Revenue Code Section 213(d), medical care includes amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. Expenses must primarily serve a medical purpose, rather than merely improving general health or providing personal benefit.

Expenses generally eligible include common medical services like doctor visits, prescription medications, and dental care. The service or item must address a specific physical or mental condition. Conversely, expenses solely for general well-being, such as vitamins not prescribed for a medical condition or cosmetic procedures without medical necessity, are not eligible. This distinction is important when evaluating the eligibility of various counseling services.

Counseling Eligibility Criteria

Counseling services can be eligible for FSA reimbursement if they meet specific IRS criteria. Counseling for the treatment of a diagnosed mental health condition, such as depression, anxiety, post-traumatic stress disorder (PTSD), or addiction, is eligible. This aligns with the IRS definition of medical care. For these services to qualify, they must be provided by a licensed professional, such as a psychologist, psychiatrist, social worker, or clinical therapist.

Some types of counseling may become eligible with a Letter of Medical Necessity (LMN). An LMN is a document from a licensed healthcare provider confirming that a service, not typically considered medical care, is medically necessary for the treatment or mitigation of a specific health condition. For instance, marriage counseling, while not generally eligible, may qualify if it is part of a treatment plan for a diagnosed mental health condition affecting one spouse, and a doctor prescribes it via an LMN.

Conversely, certain counseling services are not eligible for FSA reimbursement because they do not meet the IRS definition of medical care. These include general wellness coaching, personal development coaching, career counseling, or pre-marital counseling when there is no diagnosed medical condition. Divorce counseling also falls into the ineligible category. These services are considered for general life improvement rather than the treatment of a specific illness.

Submitting Claims and Required Documentation

To receive reimbursement for eligible counseling expenses from a Flexible Spending Account, individuals must submit proper documentation. Standard documentation includes itemized receipts or an Explanation of Benefits (EOB) from the service provider. These documents must clearly show the date of service, the service provider’s name, a description of the service rendered, the patient’s name, and the cost incurred.

For counseling specifically, additional documentation may be necessary. This includes a statement from the licensed therapist or counselor detailing the services. If the counseling is for a diagnosed mental health condition, providing a diagnosis code or a referral from a physician can strengthen the claim. If an LMN was required for eligibility, the LMN should outline the specific medical condition being treated, describe the recommended treatment, and indicate the duration for which the expense will be needed.

Once all documentation is gathered, claims can be submitted through various methods, such as an online portal, mobile application, or by mail. The LMN, if applicable, should be submitted along with the claim and supporting receipts. Some FSA administrators require a new LMN each plan year if the treatment is ongoing. After submission, claim processing times range from a few business days to a week, with reimbursements issued via direct deposit or check.