Research
What a flexible spending account asks you to prove
The published guidance sets out two written statements before a health flexible spending arrangement reimburses anything. One has to come from an independent third party and say the expense was incurred and how much it was. The other has to say it was not covered elsewhere.
Two written statements, and where each has to come from
The substantiation requirement in the published guidance is stated in three sentences and every clause in them does work.
A written statement from an independent third party has to be provided to the arrangement, stating that the medical expense has been incurred and the amount of the expense.
A second written statement has to be provided saying that the expense has not been paid or reimbursed under any other health plan coverage.
And the arrangement cannot make advance reimbursements of future or projected expenses.
The independence requirement is the part with the most practical consequence. A statement written by the person seeking reimbursement does not satisfy it, and neither does one written by that person's spouse or dependents. It has to come from a party outside the household.
This site does not give tax advice, and nothing here says what any reader should submit. What follows describes what the published guidance says.
What the document has to establish
Read together, the two statements ask for three facts, and a bare payment confirmation supplies at most one of them.
That the expense was incurred. That is a statement about a service or product actually being provided, not about money moving.
The amount of the expense. That is the one a payment record does supply.
And that the expense was not paid or reimbursed under any other health plan coverage. Nothing produced at a checkout can say that, because it is a fact about everything else that did or did not happen.
The prohibition on advance reimbursement adds a fourth requirement by implication. A document describing something that will happen does not establish that an expense has been incurred, so timing has to be visible on the face of it.
A separate article on this site sets out what a payment receipt is actually required to contain. None of the three facts above appears on that list, which is why the substantiating document is generally an itemised statement from the party that provided the care.
Where a payment card fits
Employer-issued cards change the workflow rather than the requirement.
The guidance states that debit cards, credit cards and stored value cards given to an employee by the employer can be used to reimburse participants in a health arrangement.
It then adds the qualification that matters: if the use of these cards meets certain substantiation methods, the participant may not have to provide additional information to the arrangement.
The guidance names the published rulings and notices where those methods are set out. It does not describe the methods in the passage read, and none is described here, because doing so would mean characterising documents that were not fetched.
The point for a reader is structural. Card substantiation is a set of conditions under which the arrangement can treat a charge as already substantiated. It is not a rule that a card charge needs no substantiation, and where the conditions are not met the two written statements are what the guidance asks for.
That distinction matters most where a seller's billing descriptor says nothing about what was supplied, which is common in a category sold at a distance.
What the arrangement may reimburse, and what it may not
The scope of a health arrangement is set partly by the plan and partly by the tax rules, and the guidance says so in the same sentence.
Qualified medical expenses are those specified in the plan that would generally qualify for the medical and dental expenses deduction. So the plan document narrows, and the deduction rules set the outer boundary.
One difference from the deduction is stated explicitly. Expenses incurred for over-the-counter medicine, whether or not prescribed, and for menstrual care products are considered medical care and are a covered expense for these purposes.
Three categories are excluded: amounts paid for health insurance premiums, amounts paid for long-term care, and amounts covered under another health plan.
Whose expenses count is also defined: the employee and spouse, all dependents claimed on the return, certain people who could have been claimed as dependents but for three named circumstances, and a child under a specified age at the end of the tax year.
The timing of the money runs the other way from most accounts. The guidance states that distributions generally reimburse qualified medical expenses incurred during the period of coverage, and that the full amount elected for the year has to be available at any time during that period regardless of how much has actually been contributed so far.
The same anti-double-counting rule appears here as elsewhere. Qualified medical expenses equal to a reimbursement received from the arrangement cannot also be taken as an itemised deduction.
The election, and how little of it can be changed
These arrangements are usually offered inside a cafeteria plan, which the statute defines as a written plan under which all participants are employees and participants may choose among two or more benefits consisting of cash and qualified benefits.
An amount is designated at the beginning of the plan year and withheld periodically. The guidance states that an election can be changed or revoked only if specifically allowed by law and the plan.
The regulation on election changes takes the same position from the plan's side. A cafeteria plan may permit an employee to revoke an election during a period of coverage and make a new one only as provided in the paragraphs that follow, and the statute does not require a plan to permit any of those changes.
The main route is a change in status, and it has two conditions. A change in status described in the regulation has to occur, and the election change has to satisfy a consistency rule.
The listed events are specific: changes in legal marital status such as marriage, death of a spouse, divorce, legal separation and annulment; changes in the number of dependents such as birth, death, adoption and placement for adoption; changes in employment status for the employee, spouse or dependent; a dependent satisfying or ceasing to satisfy eligibility requirements on account of age, student status or a similar circumstance; a change in place of residence; and, for adoption assistance, the commencement or termination of an adoption proceeding.
Starting or stopping a course of treatment is not on that list. For a category where purchases are frequently discontinued for ordinary reasons, the practical implication is that the election is fixed for the year in a way the spending is not.
Key takeaways
- Reimbursement requires a written statement from an independent third party that the expense was incurred, with its amount.
- A second written statement has to say the expense was not paid or reimbursed under any other health plan coverage.
- The arrangement cannot make advance reimbursements of future or projected expenses.
- Employer-issued card use can meet separate substantiation methods, which is not the same as needing no substantiation.
- Coverage is what the plan specifies within what would generally qualify for the medical expense deduction, with named exclusions.
- An election can be changed only where law and the plan allow, principally on a listed change in status meeting a consistency rule.
Frequently asked questions
What has to be submitted before a health arrangement reimburses an expense?
The published guidance states that a written statement from an independent third party has to be provided stating that the medical expense has been incurred and the amount of the expense, and that a second written statement has to be provided saying the expense has not been paid or reimbursed under any other health plan coverage. It also states that the arrangement cannot make advance reimbursements of future or projected expenses.
Why does the statement have to come from an independent third party?
That is how the guidance words the requirement. The consequence is that a statement written by the person seeking reimbursement, or by their spouse or dependents, does not satisfy it. The document has to establish that the expense was incurred and its amount, which is a fact about a service or product being provided rather than about money moving.
Does paying with an employer-issued card remove the requirement?
Not in itself. The guidance states that debit, credit and stored value cards given by the employer can be used to reimburse participants, and that if the use of these cards meets certain substantiation methods the participant may not have to provide additional information. It names the published rulings and notices setting out those methods rather than describing them, and none is described here because those documents were not read for this article.
What can a health arrangement reimburse?
Qualified medical expenses are those specified in the plan that would generally qualify for the medical and dental expenses deduction, so the plan narrows and the deduction rules set the boundary. Over-the-counter medicine, whether or not prescribed, and menstrual care products are treated as medical care for this purpose. Health insurance premiums, long-term care, and amounts covered under another health plan are excluded.
Can an election be changed mid-year?
Only where law and the plan allow it. The regulation provides that a cafeteria plan may permit revocation and a new election during a period of coverage only as provided in its listed paragraphs, and that the statute does not require a plan to permit any of them. The main route requires both a change in status from a defined list and satisfaction of a consistency rule. The listed events concern marital status, number of dependents, employment status, dependent eligibility, residence and adoption proceedings.
Why does this article not give the contribution limit?
The statute prints a base amount and then increases it each year by a cost-of-living adjustment against a named base calendar year, rounded down to a stated multiple. The published guidance prints the figure for its own year and names the revenue procedure that set it. That annual document was not read for this article, so no current-year salary reduction limit or carryover maximum is asserted here.
Sources
Each document below is named as it names itself, with the date printed on that document rather than the day it was read.
- Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans — read at Flexible Spending Arrangements (FSAs), Qualifying for an FSA, Contributions to an FSA, When To Contribute, Amount of Contribution, Distributions From an FSA, Qualified medical expenses and Qualified reservist distribution — Internal Revenue Service, January 2025
- United States Code Title 26, Section 125, Cafeteria plans — read at subsection (a), the general rule; (d)(1), the definition of a cafeteria plan; and (i), the limitation on health flexible spending arrangements and its adjustment for inflation, 2024 Main Edition — Office of the Law Revision Counsel, U.S. House of Representatives, January 2025
- Title 26 Code of Federal Regulations Section 1.125-4, Permitted election changes — read at paragraph (a), the general limit on revocations and the statement that section 125 does not require a plan to permit any change; paragraph (b), special enrollment rights; and paragraph (c), the change in status rule, its two conditions and the six categories of change in status event — Electronic Code of Federal Regulations, Office of the Federal Register, October 2001