Kittens? Pushing the limits of flexible spending accounts

Not long ago, I walked by a local optometrist’s office, and there in the window was a come- on to tax nerds and people who needed to get this close to see the sign in the first place. “We accept FLEX SPENDING for FUTURE CREDIT.”

There was just one problem with the wording: That’s not how health care flexible spending accounts are supposed to work.

You can’t blame eye specialists and others for trying, though. Each year at this time, health practitioners and retailers eagerly vie to help you drain every last dollar from your flexible spending account. That’s because you need to spend that money within a certain period or you will lose it, and often that period falls at the end of the calendar year.

You’re supposed to use the money for only healthrelated services and products. But that category is so large and its boundaries are so porous ( although the IRS gamely tries to lay much of it out in Publication 502) that clever practitioners and their patients sometimes stretch the definition of eligible expenses, going to the breaking point and beyond.

So, here are some accounts of how far they try to push the limits, and let these tales serve as a reminder of what may or may not work.

But first, a brief review session. Health care flexible spending accounts ( FSAS) are a benefit offered by employers. They allow you to set aside money from your paycheck without paying federal income taxes and to use it later for eligible health expenses that your regular insurance does not cover. Starting next year, the maximum amount you can set aside will be $ 3,050.

Employers don’t have to offer these accounts, and not every one does. Moreover, they have some discretion over the expenses they will allow.

The biggest catch, however, is one that applies to all account holders. You need to spend the money within a certain period — usually 12 months, although there are rules that may allow you to carry a limited amount of money over to the next year.

Still, it’s possible to forfeit a four- figure amount if you’re not careful. Hence, this end- of- year binge, which can include innocent ( or not- so- innocent) attempts such as the ones that follow.

Knee surgery, cat: Not this time

A request arrived not long ago for some joint- repair reimbursement.

Benefit Extras, an administrator in Lakeville, Minn., received a receipt stapled onto a claim form. The account holder listed a provider’s name, date, procedure and cost. It was only when the administrator removed the staple that someone noticed a notation underneath indicating that the operation took place at a veterinary clinic.

“We went back and asked who had the knee surgery,” said Chris Erickson, founder of Benefit Extras. “Had they been able to say that it had been performed on a taxpayer, we would have paid it.”

But it wasn’t, so they didn’t.

Emotional support cat ( singular): Yes

Erickson also regaled me with a tale of a $ 300 cat. It passed muster, eventually.

At first, the company provisionally rejected reimbursement and asked for a letter of medical necessity ( LMN). Back came the doctor’s note, describing the patient. “She is diagnosed with generalized anxiety disorder, panic attacks and recurrent major depressive disorder, in partial remission. She would benefit from having a companion animal ( cat) in her residence.”

This was enough. The cat’s needs — like food and veterinarian visits — are also FSA- eligible. The cat’s wants, however — say, a scratching post — are not.

The account holder had the temerity to request reimbursement for two cats, it turns out. Erickson’s firm decided that one was enough.

A cruise: Nice try

“We’ve had one instance of someone trying to put through a cruise,” said Chris Byrd, senior vice president at WEX, a financial technology company in Portland, Maine, that does some benefits administration work. “That no doubt was thought to be therapeutic, emotionally or psychologically.”

If you bother some mental health professionals enough, they just may write you an LMN for a trip. Erickson has seen one, too. “I did send that one to the IRS,” she said. “They basically said, ‘ No, there are more cost- effective ways to reduce stress.’ ”

VR goggles: Huh?

Byrd scratched his head when someone tried to get reimbursement for virtual reality goggles. “I’m not sure exactly what the rationale was,” he said. “You do see ads for Oculus where people are working out.”

Still, gym gear or health club memberships are generally not reimbursable unless you have a quite specific LMN. Byrd’s company rejected the request.