Formula: FSA Eligibility

Formula is typically not eligible for reimbursement with a flexible spending account (FSA), health savings account (HSA) or health reimbursement arrangement (HRA). The excess cost of a specialized formula may be eligible with a Letter of Medical Necessity (LMN) stating that the formula is necessary to treat a medical condition. Formula is not eligible for reimbursement with a limited care flexible spending account (LCFSA) or a dependent care flexible spending account (DCFSA).

What is formula?

Commercial baby formula ingredients vary widely from brand to brand, but the composition of the formula is designed to replicate the nutritional content of a mother's breast milk one to three months postpartum. The U.S. Food and Drug Administration (FDA) has regulated that all commercial baby formula products must contain 29 essential ingredients, but the base of the formula can vary. The most common types of baby formula include via Mayo Clinic:

  • Cow's Milk-Based - These formulas are chiefly designed to make it easier for babies to digest formula and closely resemble breast milk. However, because some babies could be allergic to the proteins found in cow's milk, other formula substitutes may be necessary.
  • Soy Milk-Based - Soy-based formulas are typically embraced by parents who wish to avoid animal-based foods and exclude them from their child's diet.
  • Protein Hydrolyzed Formula - These formulas are composed of proteins that have been partially broken down and fall into two categories: Partially Hydrolyzed and Extensively Hydrolyzed. Partially Hydrolyzed formulas have only a portion of the proteins broken down into short chains called peptides, while extensively hydrolyzed formulas have both peptides and free amino acids, the latter of which are classified as hypoallergenic.

How do I obtain a Letter of Medical Necessity (LMN) for formula?

Traditionally, the IRS views baby formula as a product necessary for the "general health" of the child, but outside the realm of consumer spending account reimbursement as it does not treat or alleviate a specific medical condition. However, if the child has an allergy or a medical condition that calls for a specific type of formula, a benefits administrator may choose to reimburse the difference in the cost of baby formula to treat a medical condition from regular baby formula.

To ensure that account holders will be reimbursed for the price difference in formula, a Letter of Medical Necessity (LMN) may be necessary. This should outline a specific diagnosis about how a specific type of formula will be used to alleviate the issue.

Eligibility Table

Flexible Spending Account (FSA) Limited Care FSA Dependent Care FSA Health Savings Account (HSA) Health Reimbursement Account (HRA)

Eligible

Eligible with Rx

Eligible with LMN

Not Eligible

Legal Information / Regulations

Private Letter Ruling 200941003; Information Letter 2008-0039

 


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