Week 12: What Exactly Are Section 213(d) Expenses?

If you’ve been in employee benefits for any length of time, you’ve probably said the phrase “Eligible 213(d) expense” hundreds of times. Brokers use it. Employers use it. TPAs use it. It’s practically industry shorthand.

But here’s the surprising part:
Most advisors have never actually read Section 213(d) of the Internal Revenue Code.

And that’s a problem, because many tax-advantaged accounts — FSAs, HRAs, and HSAs — depend on this section for determining what counts as a reimbursable or tax-favored medical expense. Yet 213(d) is not what most people think it is. It isn’t a list of eligible expenses. It doesn’t spell out which items are covered and which aren’t. And it certainly isn’t the same thing as Publication 502.

So what is it?

Let’s take a closer look.

Here is the core of the definition from IRC §213(d)(1):

“The term ‘medical care’ means 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.”

That’s it. This single sentence is the foundation for determining whether an expense is 213(d)-eligible.

Notice what it does not do:

• It does not list eligible items

• It does not provide examples

• It does not make distinctions between categories like dental, vision, or prescriptions

• It does not contain anything about copays, dental implants, sunscreen, or bandages

Those lists you see in brochures, PowerPoints, benefit booklets, and TPA websites are interpretations — they are not Section 213(d) itself.

Section 213(d) gives a definition, not a catalog.

At the most basic level:

An item or service is eligible if its primary purpose is medical.

That means it must be used to diagnose, treat, mitigate, cure, or prevent disease — or affect a structure or function of the body.

This is why:

• A prescription medication is eligible

• Eyeglasses and contacts are eligible

• Dental treatment is eligible

• A wheelchair is eligible

And it’s also why:

• Cosmetic treatments used purely for appearance are not eligible

• General wellness items like vitamins or toothpaste are not eligible unless prescribed to treat a specific condition

• Gym memberships are not eligible except in narrow medical circumstances

Publication 502 lists examples of medical expenses that may be deductible if someone itemizes their taxes. It’s helpful, but it also causes confusion.

Here’s what brokers and HR professionals need to know:

Publication 502 is not authoritative for FSAs, HSAs, or HRAs

It’s designed for itemized deductions, not employer-sponsored accounts.

It is not a complete list of eligible expenses

Many eligible items don’t appear in 502. Some listed items don’t apply to FSAs/HSAs.

It’s a guide — not a rulebook

It doesn’t override IRS regulations, plan documents, or how the TPA administers the plan.

Publication 502 is useful to illustrate the concepts behind 213(d), but it is not the source of truth.

Employees often want a simple yes/no list, but that’s not how 213(d) works. A better approach is to explain the underlying rule:

“An expense is eligible if its primary purpose is medical — meaning it diagnoses, treats, mitigates, cures, or prevents a medical condition.”

Here are practical guidelines brokers and employers can use:

• Avoid saying “everything at CVS is eligible.”

• Use examples sparingly (prescriptions, dental care, vision care).

• Always defer to the plan’s official eligible expense list from the TPA.

• When in doubt, employees should submit documentation or ask the administrator.

• Never guarantee that a specific item or brand will be reimbursed.

• Remind employees that HSAs have stricter eligibility rules than FSAs/HRAs, though they can be used for the same Section 213(d) expenses.

This keeps the conversation accurate without overpromising.

FSAs, HSAs, and HRAs are incredibly powerful tax-advantaged tools, but they only work as intended when everyone — brokers, employers, and employees — understands the rule that sits beneath them. Section 213(d) isn’t a checklist of eligible items; it’s a definition of what qualifies as medical care. And once you understand that definition, the broader framework for eligible expenses becomes much clearer.

For brokers, this foundational knowledge strengthens credibility. For employers, it reduces compliance risk and sets better expectations. And for employees, it helps them make smarter use of the benefits available to them. Ultimately, it’s a reminder that even the most familiar phrases in our industry are worth revisiting, especially when they form the backbone of so many benefit programs.