Client Alert
Important Deadline Approaching for Amendment of FSAs to Comply with Restrictions on Reimbursement of Over-the-Counter Medicines
June 3, 2011
This is a reminder that a cafeteria plan that contains an FSA which provides for reimbursement of over-the-counter medicines or drugs MUST be amended to restrict such reimbursement to prescribed drugs or insulin by June 30, 2011.
As discussed in a previous Client Alert, which can be read here, the Patient Protection and Affordable Care Act has revised the definition of medical expenses which may be reimbursed on a tax-favored basis under an employer-provided health plan, including a health flexible spending account (“FSA”) and health reimbursement arrangement (“HRA”), as well as a Health Savings Account (“HSA”) and Archer Medical Savings Account (“MSA”). Effective January 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from such tax-favored accounts unless a prescription is obtained (or the drug is insulin).
Although the new law applies to drugs purchased after December 31, 2010, an employer may amend its cafeteria plan to conform to the new law no later than June 30, 2011. The amendment must be retroactive to January 1, 2011. See IRS Notice 2010-59.
If you have any questions regarding this client alert, please contact Diane Fuchs or Elisa Cawood, You may also contact the Womble Carlyle attorney with whom you usually work or one of our Employee Benefits attorneys listed on the following webpage: Womble Carlyle Sandridge & Rice Employee Benefits Lawyers
For a printer friendly link to this alert, please click here.
Womble Carlyle client alerts are intended to provide general information about significant legal developments and should not be construed as legal advice on any specific facts and circumstances, nor should they be construed as advertisements for legal services.
IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice within this client alert is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in a client alert.
