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Rules change for flexible spending accounts

Over-the-counter medications will no longer be an eligible FSA expense in 2011.

By Karen Datko Oct 20, 2010 2:53PM

This post comes from Fred Yager at partner site


This is the time of year known to millions of workers around the country as the fall "open enrollment" period. Only this time, an estimated 33 million workers who have medical flexible spending accounts will need to be aware of new restriction that go into effect on Jan. 1.

If you are in this group, you are probably deciding how much of your pretax salary to divert into your account for next year or how to spend what's left in your 2010 FSA so you don't forfeit it under the annual "use it or lose it" rule.


You may want to use what's left to buy any over-the-counter drugs you use.


Here's why: Under new rules mandated by the March health reform law that go into effect Jan. 1, you can no longer spend FSA dollars for over-the-counter medications unless you have a prescription or letter of medical necessity from a doctor. The one major exception is insulin, which you can still buy with FSA dollars even in places where you get it without a prescription.


Moreover, FSA debit cards, which make it convenient to use the accounts to pay for out-of-pocket medical expenses, will no longer work for over-the-counter drug items, even if you have a prescription or letter. Instead, you'll have to pay out-of-pocket and then submit a reimbursement claim.


During the transition period, while drugstores reprogram their computers, FSA debit cards also may not work at some stores for non-drug items, such as contact lens solution, that you can still use your FSA for in 2011. FSA debit cards should still work for prescription drugs.


Even if your employer allows you a couple of months into the new plan year to use up the previous year's funds, this grace period will not apply when it comes to over-the-counter medication.


More from and MSN Money:

Oct 21, 2010 7:55PM
Gee... Yet another way that the Obama administration is trying to generate tax revenue...  I guess voting this next month will show him how the people feel - although I'm sure he knows already, since all he's trying to do is run the country into the ground anyway!
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