What your FSA actually covers

Investor Services Insights · Updated for 2026

The most common thing said about flexible spending accounts is that they cover medical expenses. This is true and nearly useless. The operative question is which expenses, and the answer is set not by your employer but by the Internal Revenue Code.

The governing standard

An FSA reimburses expenses for medical care as defined in Section 213(d) — amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting a structure or function of the body. Two words in that sentence do the work: treatment and prevention. Something that merely improves general health does not qualify. A gym membership is not medical care. A prescribed course of physical therapy is.

Broader than assumed

Employees routinely forfeit balances while paying cash for eligible items. Deductibles, copayments, and coinsurance qualify. So do dental work, orthodontia, eye exams, glasses, contact lenses, and corrective surgery. Since 2020, over-the-counter drugs no longer require a prescription to be reimbursable, and menstrual care products are expressly eligible — a change that took years and is still not widely known.

Also eligible, and frequently missed: prescription sunglasses, breast pumps and lactation supplies, fertility treatment, mental-health therapy, smoking-cessation programs, blood-pressure monitors, thermometers, first-aid supplies, sunscreen of SPF 15 or higher, and mileage driven to obtain care, reimbursable in 2026 at 20.5 cents per mile.

Narrower than hoped

Cosmetic procedures are excluded unless they correct a deformity from congenital abnormality, injury, or disease. Vitamins and supplements taken for general wellbeing are excluded, though a specific supplement prescribed to treat a diagnosed condition may qualify with a letter of medical necessity. Insurance premiums are generally not FSA-eligible at all. Neither is a nutritionist’s fee absent a diagnosis, nor a massage without one.

The letter of medical necessity is the hinge in the ambiguous cases. It is a physician’s written statement that an item treats a specific diagnosed condition. It converts a great many rejected claims into approved ones, and almost nobody asks for one.

What this means in December

Most FSA dollars are forfeited not because employees over-elected but because they did not know what qualified. Before you conclude you cannot spend a balance, check whether you have deferred dental work, need a new pair of glasses, or have been paying cash for over-the-counter medication all year.

Your plan administrator publishes the definitive list, and plans may be more restrictive than the Code permits. Read yours. The difference between a forfeited $600 and a used $600 is an afternoon of attention.

This article is general information, not individualized investment, legal, or tax advice. Sources referenced include the Internal Revenue Service, Department of Labor, Securities and Exchange Commission, and FINRA. Consult a qualified professional about your circumstances.

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