Lifetime care advance payment: FSA Eligibility

Lifetime care advance payments related to assisted living are never eligible for reimbursement with a flexible spending account (FSA), health savings account (HSA), health reimbursement arrangement (HRA), limited care flexible spending account (LCFSA) or a dependent care flexible spending account (DCFSA).

What is a lifetime care advance payment?

A lifetime care advance payment, also known as a founder's fee, are additional expenses charged by nursing homes or retirement facilities that are made for the home's promise to provide lifetime care for the patient, as well as direct medical care. In some cases, this fee is laid out in a life-care contract offered by the facility, and taxpayers can deduct a portion of this expense each year as long as it is properly allocated to offer direct medical care to patients.

In most cases, lifetime care advance payments are a concern for caregivers of elderly patients and physically or mentally impaired children. Payments made to a private institution for lifetime care of a dependent upon the death or inability to provide care of the payee are considered deductible medical expenses under the condition that the institution that receives these payments will take over the care of the child and aren't refundable as deductible medical expenses.

Why aren't lifetime care advance payments not eligible for reimbursement?

Under IRS ' 213(d)(1), "medical care includes amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body." This includes medical equipment, supplies and devices." Because lifetime care advance payments are conditional expenses that are paid for the prospect of future care and not directly relating to medical care conducted during an account holder's current plan year, they are not eligible for reimbursement with consumer-directed healthcare accounts.

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

 


AZ-PROD-WEB02 11/19/2017 1:11:27 AM