Is Melatonin an FSA-Eligible Expense?

Flexible Spending Accounts (FSAs) offer a benefit, allowing individuals to set aside pre-tax dollars to cover qualified medical expenses. A common inquiry among account holders concerns the eligibility of everyday items, such as melatonin, for reimbursement. This article aims to clarify the specific rules governing FSA eligibility for melatonin and similar over-the-counter products.

General FSA Eligibility Rules

The Internal Revenue Service (IRS) defines a “qualified medical expense” as the cost of diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. This definition serves as the foundation for FSA eligibility. Items inherently eligible include prescription medications, doctor’s visits, and many dental and vision services.

Before 2020, most over-the-counter (OTC) medications required a doctor’s prescription to be FSA-eligible. The CARES Act eliminated this prescription requirement for many OTC drugs and medicines as of January 1, 2020. While this broadened eligibility for common items like pain relievers and cold medications, some products, particularly dietary supplements, still require a medical recommendation, such as a Letter of Medical Necessity (LMN), to qualify.

Melatonin’s Eligibility Status

Melatonin is sold as a dietary supplement and is available over-the-counter. Due to its classification, melatonin is not eligible for FSA reimbursement if purchased for general wellness or routine sleep support. IRS guidelines specify that FSA funds must be used for products or services medically necessary to treat, diagnose, or manage a specific health condition.

For melatonin to be considered a qualified medical expense, a healthcare provider must determine it is medically necessary to address a specific medical condition. Without this medical recommendation, melatonin does not meet the criteria for reimbursement from a Flexible Spending Account.

Required Documentation for Over-the-Counter Items

When an over-the-counter item, such as melatonin, is deemed medically necessary, specific documentation is required for FSA eligibility. A Letter of Medical Necessity (LMN) serves as this document. An LMN is a formal letter from a healthcare provider, such as a physician, explaining why a particular item or service is recommended to treat a specific health condition.

The LMN must outline the medical condition being treated, provide a detailed description of the prescribed item (including its name, dosage, and frequency), and state the duration for which the expense will be needed. It certifies the expense is not for general health purposes but is directly related to the diagnosis, treatment, or prevention of a specific illness. A formal prescription from a doctor, containing similar details, can also fulfill this documentation requirement.

Submitting Your Claim or Using Your FSA Card

After obtaining the necessary documentation, such as a Letter of Medical Necessity or a prescription, and making the purchase, you can submit your FSA claim. Most FSA administrators offer multiple methods for claims submission, including online portals, mobile applications, or mail. When submitting a claim for reimbursement, include an itemized receipt for the melatonin purchase along with the LMN or prescription. The receipt should show the vendor name, date of purchase, a description of the product, and the expense amount.

If using an FSA debit card at the point of sale, retain all receipts and supporting documentation. While the card may process the transaction, your FSA administrator might later request documentation to substantiate the purchase in case of an audit. The IRS requires that you maintain records for at least three years to verify the eligibility of all expenses reimbursed through your FSA.