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WASHINGTON — The Internal Revenue Service today issued guidance reflecting statutory changes regarding the use of certain tax-favored arrangements, such as flexible spending arrangements (FSAs), to pay for over-the-counter medicines and drugs.
The Affordable Care Act, enacted in March, established a new uniform standard that, effective Jan. 1, 2011, applies to FSAs and health reimbursement arrangements (HRAs). Under the new standard, the cost of an over-the-counter medicine or drug cannot be reimbursed from the account unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan.
A similar rule goes into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs).
Employers and employees should take these changes into account as they make health benefit decisions for 2011.
For details on current rules, see Publication 969 , Health Savings Accounts and Other Tax-Favored Health Plans.
- IRS Health Savings Accounts (HSAs) – Eligibility and Rules (personal-tax-planning.suite101.com)
- The California Endowment Launches Statewide Effort to Educate Californians About the Benefits of the Health Care Law (eon.businesswire.com)
- Sebelius Announces 1 Million Medicare Beneficiaries Have Received Prescription Drug Cost Relief Under The Affordable Care Act (medicalnewstoday.com)
- Patient Money: High-Deductible Plans Grow, but Not Everyone Should Get on Board (nytimes.com)
- 16.6 million small business employees could benefit from ACA provisions starting this year (eurekalert.org)
- An Unexpected Answer on the Affordable Care Act & the Deficit (whitehouse.gov)
- Podcast interview: Impact of health reform on Flexible Spending Accounts (healthbusinessblog.com)
- Nearly 2,000 Employers and Unions Approved into New Affordable Care Act Program (nlm.nih.gov)
- Koch Industries Slaps Health Care Law With One Hand While Holding the Other Hand Out (crooksandliars.com)