Getting to know your FSA program

Who’s covered, what’s covered

First, the rules

Each year, you can use the funds you set aside in your FSA to pay for hundreds of eligible expenses for yourself and your eligible dependents. But before you pay, make sure you know the rules regarding who's covered - and what's covered. The IRS regulations are extensive, but the basic rules are clear:

Who’s covered?

You, your spouse, and any children or other individuals you can claim as dependents on your tax return.

What’s eligible?

Expenses for health care: Generally, services and products that are medically necessary to treat a specific condition are considered eligible health care expenses. Cosmetic or non-medical expenses are not eligible. It's important to note that beginning 1/1/2011, you will need a doctor's prescription to be reimbursed from your account for Over-the-Counter (OTC) drugs and medicines. The new requirement was included as part of the Affordable Health Care Act. For more information about how the Act will affect your account, please visit the Health Care Reform page on the WageWorks Learning Center.

Expenses for dependent care: These typically include care provided for your qualifying child (under age 13) or other qualifying dependent, while you work or which enables you to work. Your care provider must meet state and local laws and provide his/her Social Security or Tax ID number.

Proof of expense.

To validate an eligible expense for the IRS, you must be able to provide appropriate third-party proof that you incurred it - such as a provider receipt, invoice, payment contract, or an Explanation of Benefits (EOB) from your health plan. This document must show the name of the qualified individual who received the service or purchase for any expense other than over-the-counter items. A debit card receipt by itself is not sufficient. To meet the new prescription requirement for OTC items, you must include a doctor's prescription (or copy) that contains the prescription number or you must include the prescription number on the item's receipt.