Limited-Purpose Medical Reimbursement Account

Limited-purpose medical reimbursement accounts are used to cover dental and vision expenses considered tax-deductible by the IRS, but not paid by any health plan.

How do limited-purpose medical reimbursement accounts work?
Limited-purpose medical reimbursement accounts are most often used in conjunction with a health savings account (HSA).

If an employee, their spouse, or dependents are enrolled in a qualified, high-deductible health plan, they can use HSA funds to pay for medical services on a tax-favored basis. Then flex account contributions can be used for qualified expenses not paid from any other source.

The total amount elected for a medical reimbursement account is available to the employee any time during the year, even if the funds have not yet been withheld from his or her pay.

What expenses qualify?

• Dental and vision plan deductibles
• Dental and vision care expenses
• Orthodontia not covered by a dental plan

Can an employee switch to a limited-purpose medical reimbursement during the plan year?
Employees cannot have an HSA and a general-purpose medical reimbursement account at the same time. If they enroll in an HSA-qualified high-deductible health plan, they can switch from a general-purpose medical reimbursement account to a limited-purpose medical savings account during the year. If your plan includes a grace period, they will not be able to fund their HSA until the first day of the next month following the end of the grace period.

Employees may not change from a limited-purpose medical reimbursement account to a general-purpose account for any reason during a plan year.

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