Who determines what is FSA Eligible?

Question

I have a Limited Purpose Flexible Spending Account and I recently added its debit card to my Amazon account which has an FSA eligible store. Items are explicitly marked FSA eligible like shown in the image below. I rounded up a bunch of product and checked out. The purchases were all declined on the FSA card so I later submitted a claim with the out of pocket receipts charged to the backup credit card used during the transaction. I find out 9 days later that the claim was denied too. The annotation provided in the EOB Notes column was 999 - This type of expense is not covered by your spending account

I’m starting to think there’s multiple players in the FSA arena, the IRS, the insurer, my employer, and maybe even the FSA product vendor.

Is there some hierarchy or intersection of eligibility among the different parties that establishes what’s specifically eligible? How can I verify in advance what I’m free to purchase?

Answer 1

A limited purpose FSA is materially different from a healthcare FSA. Most of the time when you read about an FSA it's within the context of a healthcare FSA.

A limited purpose FSA is typically only able to reimburse healthcare type expenses that are specifically non-medical; usually things like dental and vision expenses, glasses etc. Limited purpose FSAs exist primarily for folks to use an HSA and an FSA at the same time. In order to offer both, the FSA must be stripped of the ability to cover medical care related costs that would be eligible for reimbursement through an HSA.

I would call your administrator to get an idea of what your limited purpose FSA covers.

Answer 2

Quid's correct, I dug into my HR website and the precise benefit I have is known by the company as a Limited Purpose Health Care Spending Account, which when viewed from the insurer's website is listed less precisely as Limited Purpose Flexible Spending Account. Quoting from the HR text:

Limited Purpose Health Care Spending Account

If you’re enrolled in the PPO Plan and open a Health Savings Account, you’re not eligible to contribute to a regular Health Care Spending Account, but you can open a Limited Purpose Health Care Spending Account to pay for eligible out-of-pocket dental and vision costs.

If you choose to open a Limited Purpose Health Care Spending Account, your eligible expenses include:

• Dental deductibles, coinsurance amounts, and other dental expenses not covered by a dental plan

• Vision and hearing care expenses not covered by a benefit or insurance plan, including examinations, treatment, corrective lenses, and hearing aids

• Non-prescribed reading glasses and contact lens solution and supplies

The limitations are indeed clearly spelled out. At some point I must have mixed it up with their offering of a Health Care Spending Account which does cover the sort of products I was attempting to purchase earlier...

Health Care Spending Account

Eligible expenses include:

• Medical deductibles, coinsurance or copay amounts, and other health care expenses not covered by a medical plan

• Dental deductibles, coinsurance amounts, and other dental expenses not covered by a dental plan

• Vision and hearing care expenses not covered by a benefit or insurance plan, including examinations, treatment, corrective lenses, and hearing aids

• Prescription drug copays

• Non-prescribed first aid supplies, reading glasses, contact lens solution and supplies

• Most other health care expenses that the Internal Revenue Service may consider deductible from your personal income tax return that aren’t reimbursed or paid for by an company health plan or any other health plan