The cost of healthcare can be astronomical. Even with health insurance, families across the country spend a significant portion of their earnings on medical expenses. In 2020, the average household with employer-provided insurance and an average income of $83,000 paid over $5,000 in healthcare expenses.
Flexible spending accounts (FSAs) help offset healthcare costs by allowing individuals to pay for medical expenses with pretax dollars. When it comes to FSA reimbursement, most people think of using their FSA funds on medical treatment and material products. While that’s usually the case, eligible medical expenses can include a living and breathing being, like a service animal or an emotional support animal, as noted by the IRS. If your assistance animal is part of a medical treatment strategy, then there’s a strong chance that some of your service animal expenses will be eligible for FSA reimbursement.
That said, specific requirements need to be met for you to use FSA on a service animal. In this cohesive guide, we will walk you through what FSA reimbursement is and how you can use it to cover the costs of your furry friend.
How does FSA Reimbursement Work?
First things first: what is FSA reimbursement, and how does the process work? A Flexible Spending Account, also known as a flexible spending arrangement or a healthcare flexible spending account, is a special account you can put money into to pay for out-of-pocket healthcare costs, including doctor’s visits, prescription drugs, and even service animals. On occasion, employers may also make contributions to an FSA account. The way that FSA reimbursement works is money is set aside from your paycheck before taxes are taken out. Setting aside pre-tax dollars means you pay fewer taxes and increase your take-home pay by your tax savings.
Once you set up your account, you need to estimate your eligible expenses for the upcoming year and determine how much money you want to set aside from your pay to go into your FSA. This amount is called your ‘election.’ When estimating how much money you should set aside, check your healthcare claims and invoices from the previous year to get an idea of how much you might spend on out-of-pocket healthcare costs this year. When in doubt, tend towards the more conservative side of your range, as you will lose any unused funds. The IRS has a “use or lose” rule for FSAs. Any unused money will be lost by the end of the 12-month period. However, some employers offer a “run-out” period that allows you to submit claims for eligible expenses incurred during the plan year. This grace period allows you to incur claims for up to two and half months after the plan year's end and submit them against the prior year’s balance for reimbursement.
It’s important to remember that there is a limit to how much you can contribute to your FSA. As a result of the Affordable Care Act, employee contributions are capped at $2,850 per year, and you are prohibited from contributing more than this amount. In some cases, your employee plan may have an annual limit even less than this amount. However, if you have a spouse and your spouse is eligible to make contributions to a health FSA, then each of you can contribute up to $2,850 to your own health FSA. The same rule applies to spouses with the same health FSA plan sponsored by the same employer.
FSA Reimbursement for Service Animals
According to the Americans with Disabilities Act, a service animal is any dog that is individually trained to do work or perform tasks for the benefit of an individual with a disability, including a physical, sensory, psychiatric, intellectual, or other mental disability. If your assistance animal fits within that description, you may be able to use your FSA funds for your furry friend. Emotional support animals (ESAs) may also be FSA eligible, especially if your doctor can write a Letter of Medical Necessity proving how the animal will help you more than medication or other forms of treatment.
According to the IRS, you can use your FSA for any expenses associated with your service animal, including food, training, and veterinary costs. You can also use your FSA funds to pay for a new service animal.
How to Submit a Claim
Now that you know what a Flexible Spending Account is, here’s a quick guide on submitting a claim and the documents you will need to do so.
Submitting Your Claim
You can submit an FSA reimbursement claim to your employer in three ways: online, in the mail, or through fax. Submitting your claim is easy. All you need to do is visit www.MyEnroll.com and log in with your username and password. Once you navigate to the FSA claims page, you will simply describe your claim, the person who incurred the claim, the date of the claim, and upload the supporting documents. This website will also allow users to mail or fax their claims.
When submitting your claim, you must provide proof of the medical expense and a statement that your health insurance did not cover this expense. All health care FSA claims should include an appropriate claim form, a signature, a date, a list of expenses, a list of the dates of service, identification of whose expenses (participant or dependent), the amount, and any relevant receipts. Credit card receipts and canceled checks are not adequate documentation.
If you submit claims for a service animal, you need to have a Letter of Medical Necessity (MN). This letter will prove that you require an animal for your medical needs and that its primary function is for your health and not companionship.
Check With Your Employer
Last but not least, make sure that you check with your employer about the exact terms of your FSA plan. Your employer sets the exact terms of your plan, so don’t be surprised if your plan slightly differs from others.
The Bottom Line
While the services provided to you by an assistance animal may be invaluable, the financial cost can be a huge burden. The estimated cost of owning a service dog ranges between $17,000 to $40,000. Thankfully, if you own a service animal or, in some cases, an emotional support animal, then there’s a good chance that your furry friend may be FSA eligible. You can use funds from your FSA account to pay for vet visits, food, training, and even purchasing a new service animal.
When submitting your FSA reimbursement claim, you will need to have a Letter of Medical Necessity written by a medical professional. This document will prove that you rely on your assistance animal for medical purposes. It’ll also be essential for you to keep close tabs on all of your service animal expenses. For instance, keep physical records of the receipts you spend on dog food and your annual trips to the vet. Credit card receipts will not be accepted as valid documents. The more information and documents you can provide the IRS, the better.