Employee Benefits-IRS Reminds Us That A Health FSA May Not Reimburse A Participant’s Health Insurance Premiums

In a private letter ruling, the IRS reminds us that a Health FSA may not reimburse a participant’s health insurance premiums.  Here is what the letter says.

The IRS was asked about the rules on submitting Medicare premium expenses as claims under a health flexible spending arrangement (a “health FSA”).  The IRS was also asked why a participant was required to enroll in the Medicare program after experiencing renal failure.

The participant had submitted her Medicare premium expenses to her health FSA for reimbursement.  The administrator of her health FSA denied her claims, citing to an IRS regulation that prohibits the reimbursement of medical premiums.  See Prop.Treas. Reg. 1.125-5(k)(4).  As stated in the proposed regulation and IRS Publication 969, a health FSA cannot reimburse health insurance premium payments.  Medicare premiums are premiums for other health coverage and thus are not reimbursable expenses.  While health insurance premiums, including Medicare premiums, are medical expenses for purposes of the itemized deduction for medical expenses (see Publication 502), the rules for health FSAs do not allow them to be reimbursed by a health FSA.

The IRS noted that it does not administer the Medicare program and therefore, cannot answer the participant’s questions about the requirements to enroll in Medicare.