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Release of IRS Notice 2003-102
Today’s IRS announcement -- expanding the breadth of flexible spending
accounts (FSAs) -- is unprecedented.
Permitting allergy and other OTC drugs to be reimbursed through FSAs
revenue ruling will also give further incentives for employer-provided
health reimbursement arrangements.
Previously, FSAs reimbursed prescription only drugs. The ruling also
specifically excluded vitamins and other dietary supplements for general
health purposes from reimbursement.
Cafeteria/HRA plan administrators will have to be vigilant in substantiating
nonprescription drugs to distinguish OTC drugs that are for the general
well being of the individual (such as nutritional supplements) or for
cosmetic purposes (excepted as otherwise permitted under Section 213),
which are still not permitted. The good news is that employees only need
to submit receipts that clearly show that the OTC was to treat a medical
condition.
YOU DO NOT NEED A PRESCRIP FROM A PHYSICIAN. Here is an
excerpt from the IRS Notice:
Employee A purchases an antacid, an allergy medicine, a pain
reliever, and a cold medicine from a pharmacy, none of which are
purchased with a physician's prescription. Employee A purchases
these items for personal use, or for the use of Employee A's spouse or
dependents, to alleviate or treat personal injuries or sickness.
Employee A also purchases dietary
supplements (e.g., vitamins) without a
physician's prescription to maintain the
general health of Employee A, or
Employee A's spouse or dependents.
Employee A submits substantiated claims
for all of these expenses, which have
been incurred during the current plan
year, to Employer N's health FSA for
reimbursement. Employee A is not compensated for these expenses
by insurance or otherwise.
This is great news because it means the use it or lose it rule could be
gone. Why? The employee can "shop" at the local pharmacy at the
end of the year to clean out their account shopping for OTCs!
On another note I have been in
the cafeteria plan
administration field for nearly
20 years and prior to 1994
employees could submit for
over the counter physician
prescribed medicine. This
Notice is broader in scope
The timing on the release of
Revenue Ruling 2003-102 is
helpful, as most of our clients
begin their enrollments for
2004 in the fall and this good
news should encourage
participation in the plans.
Our plan document is flexible enough to allow employees to submit NOW
for OTC.
For a printable version of eflexgroup.com's hand out concerning the IRS Notice, click here.
For a printable version of this article, click here.
For guidelines and examples of eligible Over-the-Counter claims, click here.
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