Does a Flexible Spending Account (FSA) Cover Lasik?

Flexible spending accounts (FSAs) are special savings accounts that can be set up through your employer and provide you with a number of tax benefits. You can set aside some of your regular earnings to an FSA along with contributions from your employer (if it makes them). You can use FSAs to pay for qualified care services for children under 12 and qualifying adults. Or they can be used to reimburse you for qualified dental and medical expenses. If you're considering LASIK surgery for your eyes, you may be wondering whether it qualifies as a medical expense.

Key Takeaways

  • Flexible spending accounts are offered through employers and cover qualified medical and dental expenses.
  • Qualified expenses include payment for services, equipment, premiums, and transportation costs.
  • LASIK is the most popular laser procedure in the U.S. and is one of a number of eye surgeries covered under FSA plans.
  • You must make an appointment with an ophthalmologist to determine whether the procedure is medically necessary in order for it to qualify under your FSA.
  • Make sure you plan ahead before you decide to use your FSA to cover the surgery.

What Is a Qualified Medical Expense?

A qualified medical expense is any cost paid toward the diagnosis, treatment, cure, or prevention of disease. Costs include payment for services to doctors, surgeons, dentists, and other medical specialists, as well as those paid for equipment, supplies, and other products. Health insurance premiums and transportation costs to get you to and from medical care are also deemed qualified medical expenses.

If you're considering laser eye surgery and want to use your FSA to pay for it, you're in luck. According to the Internal Revenue Service (IRS), it does qualify as a medical expense for an FSA as long as you make an appointment with an ophthalmologist to first determine whether the procedure is medically necessary.

This means you can use the distributions from an FSA to pay for qualifying LASIK procedures. Although LASIK is not the only laser eye surgery covered under an FSA, it is the most popular laser procedure in the United States.

Special rules apply to the rollover provision and the grace period for the 2021 tax year. Under the Consolidated Appropriations Act, employers can allow all unused funds to be carried over from 2021 to 2022. Or, employers can extend the grace period to 12 months rather than two and a half months. The effect of either decision is the same—all unused funds can be carried over and used throughout the entire year. 

Advantages and Disadvantages of a Flexible Spending Account (FSA)

There are many pros and cons of having and using an FSA to cover your medical and dental expenses. The following are the most common benefits and drawbacks.

Advantages

  • You can use your FSA for other vision-related expenses, such as glasses, contact lenses, eye exams, and optometrist visits.
  • FSA funds are taken out of your paycheck before taxes, saving you money on expenses you would pay for anyway. It also reduces your taxable income at the end of the year.
  • FSAs are only available through employer-sponsored health care plans, which means that employers can also contribute.

Disadvantages

  • FSA funds must be used by the end of the calendar year or they are forfeited back to your employer. The IRS allows employers to roll over unused employee contributions for a maximum of two and a half months after the end of the plan year to their current FSA.
  • Some employers may not even provide a grace period for their employees' FSAs. That's because it's entirely up to them whether to offer one and, if they do, how long it lasts.
Pros
  • You can use your FSA for any type of vision-related expenses

  • FSA funds save you money and reduce your taxable income because they're deducted before taxes

  • Your employer may also contribute to your plan

Cons
  • You must use your funds by the end of the calendar year or before the end of the grace period

  • Employers may not grant a grace period

Plan Ahead

LASIK is not covered under medical insurance, and vision insurance may only provide you with a small discount. This leaves your FSA as the only means of paying for LASIK unless you pay out-of-pocket or take out a medical loan.

LASIK procedures are considered elective operations. An ophthalmologist can provide you with an estimate of how much your procedure will cost. FSA contributions are capped to a maximum of $2,750 for 2021 and $2,850 for 2022. By delaying the procedure, you could have fewer out-of-pocket expenses.

Article Sources

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