Introduction
In the realm of orthodontia reimbursement, it's essential to understand the criteria for expense qualification. Being billed or making payments alone does not meet the "incurred" requirement. This is specifically established by the date when medical care is provided, as stated in regulations. Unusual cases like orthodontia, spanning multiple years, pose challenges to upfront reimbursement due to the coverage period constraint. However, a previous informal guidance indicated the IRS's leniency towards prepaid orthodontia expenses, as long as the employee makes advance payments for the services. The Federal Government FSA Plan echoes a similar sentiment, permitting reimbursement for pre-paid orthodontia expenses, irrespective of the service date. On a related note, toothpaste generally doesn't qualify as a medical expense, unless it's specialized and prescribed for a specific medical condition. In contrast, toothbrushes, even if recommended by a dentist for a medical condition, are considered personal items and are not primarily for medical care, making them ineligible for reimbursement as medical expenses, as per IRS guidelines.
Preventative, Cosmetic, and Restorative Dental Procedures
Preventative dentistry (general dentistry) is concerned with the prevention of dental problems and maintenance of a healthy mouth. Most dental checkups include preventative dentistry, such as a full examination, dental x-rays, and dental cleaning. With proper preventative care, most patients can avoid more costly and invasive restorative dentistry.
Cosmetic dentistry is primarily dedicated to enhancing the appearance of a patient’s smile. Before undergoing any cosmetic dentistry treatments, a patient must first undergo a complete examination to be sure there are no underlying problems such as decay and infection which could compromise cosmetic outcomes. Cosmetic procedures include tooth whitening, porcelain veneers, and Invisalign tooth straightening.
Restorative dentistry focuses on restoring function and structure to teeth that are missing, damaged, or infected. Dental crowns are the most common restorative dentistry treatment. Another restorative treatment is a root canal, which removes infection from a tooth. Dental implants and dentures also fall into this category since they are designed to replace missing teeth, restoring the function and appearance of a patient’s mouth.
Orthodontia Reimbursement
Can employees be reimbursed for prepaid expenses?
The fact that a participant has been billed for or has paid an expense, standing alone, is not enough to satisfy the "incurred" requirement. The only date that is relevant to establishing that an expense has been incurred is "when the participant is provided with the medical care that gives rise to the medical expenses." The regulations specifically state that an expense is not incurred just because the participant "is formally billed or charged for, or pays for the medical care."[1]
What about unusual expenses, such as orthodontia, that can span two or more years?
When this is the case, reimbursement of the entire expense "up front" generally would violate the requirement that the expense be incurred during the coverage period. Nevertheless, in the past, IRS officials had informally commented that the IRS would not enforce the "expense-incurred" requirement for prepaid orthodontia expenses.
Consistent with this prior informal guidance, the 2007 proposed cafeteria plan regulations confirm that Health FSAs may, but are not required to, reimburse advance payments for orthodontia services, so long as the employee has actually made the payments in advance to receive the services. Under the regulations, the orthodontia services are deemed incurred when the employee makes the advance payment.[2]
The Federal Government FSA Plan
Although not official guidance, the federal government's FSA Program allows for "reimbursement for pre-paid orthodontia expenses, up to the elected amount, regardless of the date of service.”
Toothbrushes and Toothpaste FAQ
Is toothpaste a medical expense?
Generally, toothpaste won’t qualify.[3] However, the excess cost of a special toothpaste that is recommended to treat a specific medical condition might qualify, although a special toothpaste that is a drug or medicine would have to be prescribed in order to be reimbursable.[4] In addition, topical creams or other drugs (e.g., fluoride treatment) used to treat a medical condition would qualify, so long as they are primarily for medical care, and are prescribed if considered a medicine or drug.
Are toothbrushes a qualifying medical expense?
Toothbrushes won't qualify, even if a dentist recommends special ones (such as electric or battery-powered) to treat a medical condition like gingivitis. Toothbrushes are items that are used primarily to maintain general health—a person would still use one even without the medical condition. Thus, they are not primarily for medical care.[5]
Has the IRS issued any formal comments on toothpaste and toothbrushes?
Yes: “You can't include in medical expenses the cost of an item ordinarily used for personal, living, or family purposes unless it is used primarily to prevent or alleviate a physical or mental defect or illness. For example, the cost of a tooth- brush and toothpaste is a nondeductible personal expense.”[6]
Footnotes
[1] Prop. Treas. Reg. §1.125-6(a)(2)(ii).
[2] Prop. Treas. Reg. §1.125-5(k)(3)(i)
[3] Treas. Reg. §1.213-1(e)(2)
[4] Informal nonbinding remarks of Donna Crisalli, IRS, Office of Chief Counsel, Mar. 30, 2012 ECFC Conference
[5] Informal nonbinding remarks of Harry Beker, Barbara Pie, and John Sapienza, IRS, Office of Chief Counsel, Oct. 22, 2003 ECFC Conference
[6] IRS Publication 502 issued Nov. 11, 2016, page 17.
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