Late payment fees are not eligible for reimbursement with a Flexible Spending Account (FSA) or Health Savings Account (HSA).
Why Are Late Payment Fees Not FSA/HSA Eligible?
Late payment fees are administrative or financial penalties charged for missed or delayed payments. These charges are not related to medical care, diagnosis, treatment, or prevention of disease and therefore do not qualify as eligible expenses under IRS Code Section 213(d).
According to IRS Publication 502, only expenses directly related to medical care are eligible for reimbursement. Any costs associated with financing, interest, or late payments are considered non-medical and ineligible.
What’s Not Covered?
Late fees charged by medical providers, hospitals, or clinics
Missed payment penalties on medical bills or health services
Interest or administrative charges added to unpaid balances
Bank or credit card late fees related to medical purchases
Any finance-related charge not tied to direct medical care
LMN and Exceptions
Late payment fees are not eligible under any circumstances. A Letter of Medical Necessity (LMN) cannot make these expenses reimbursable.
FSA and HSA funds may only be used for qualified medical expenses — not for penalties, service charges, or other non-medical costs incurred as part of payment delays.
