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Today the IRS announced it will treat expenses for breast pumps and supplies that assist in lactation as deductible medical expenses (Announcement 2011-14) through Section 125 Cafeteria Plans (including Flexible Spending Accounts, Health Savings Accounts, and Archer medical Savings Accounts).
Previously, these expenses had to include a Letter of Medical Necessity in order to be reimbursed through an FSA or HSA as the IRS considered them to be “general health” items. The IRS now is stating that breast pumps and supplies that assist in lactation “are for the purpose of affecting a structure or function of the body of the lactating woman,” and therefore are deductible under IRC § 213(d).
In the announcement, the IRS stated its intention to update Publication 502, Medical and Dental Expenses, to reflect this change.
As promised, we have updated our list of eligible Flexible Spending Account (FSA), Health Savings Account (HSA), and Health Reimbursement Account (HRA) expenses to include the Over-the-Counter (OTC) changes that go into effect as of 1/1/2011. You can get the updated list under the Forms page on our site or by clicking on this link: 2011 Eligible Expenses w/OTC Changes.
The IRS also has a short (2 minute) video that is a good overview of the changes taking place.
We have created a short (under 6 minute) video explaining the new Over-the-Counter (OTC) rule changes that go into effect on January 1st, 2011. These changes are due to the Affordable Care Act that passed early in 2010 that will effect employees with a Flexible Spending Account (FSA), Health Savings Account (HSA), or a Health Reimbursement Account (in some cases).
On Friday, September 3, 2010, the IRS issued its initial guidance with respect to the new rule included in the Affordable Care Act that requires a doctor’s prescription for the reimbursement of over-the-counter (OTC) drug and medicines from a tax-advantaged health care account. While the guidance offers little in the way of new information, it does confirm the generally accepted interpretation of how the change will be applied. Please see the attached letter from SIGIS, most of which is excerpted here.
In summary, the guidance confirms the following:
- Participants will still be able to use their tax advantaged health care accounts for purchases of ALL OTC drugs and medicines, as long as they have a doctor’s prescription.
- The rule applies to all tax-advantaged health care accounts, including Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs) and Archer Medical Savings Accounts (Archer MSAs).
- The rule takes effect January 1, 2011 and applies to purchases on or after January 1, 2011, regardless of plan year.
- The only acceptable form of documentation for reimbursement for OTC drugs and medicines is a doctor’s prescription, as regulated by state law.
- Insulin, medical devices (crutches, blood sugar monitors, etc.) and items such as bandages, contact lens solution, denture bond, etc. remain eligible and will not require a prescription.
- The guidance allows for a 15-day enforcement delay until 1/16/2011 for card transactions (they’ll be assumed to qualify until that day). This is to allow merchants time to implement the new eligible product list.
The IRS has posted additional details, including a helpful FAQ, about the OTC rule change on its Affordable Care Act website and includes links to the following:
In terms of the impact to the SIGIS IIAS standard, SIGIS is still in the process of evaluating the latest guidance and will communicate any changes to the standard or best practices over the coming weeks. One item that needs clarification from SIGIS is how a prescribed OTC medicine or drug will be handled with respect to the standard. For instance, will it deny or will it approve as part of the RX total? As we receive more information we will communicate it.
If you have any questions or need additional information, please contact us at 1-800-651-4855 x 5
The Patients’ Freedom to Choose Act was introduced in the House today by Rep. Erik Paulsen (R-MN, 3) and a companion bill was introduced in the Senate by Senator Kay Bailey Hutchison (R-TX). The bills (H.R. 5923/S. 3673) would repeal the $2,500 cap on flexible spending accounts (FSAs) effective 1/1/2013 and the restrictions placed on the use of FSA and HSA dollars for reimbursement of over-the-counter drugs included in the health care reform law (effective 1/1/2011). These changes are important for those of us who utilize FSAs, HSAs, and HRAs to help cover the cost of our health care expenses.
To access the bill language: Click Here
To access the press release by Rep Paulsen: Click Here
To access the press release by Sen. Hutchison: Click Here
Although House and Senate Leaders have indicated they do not intend to bring health care reform related items to the floor during the remainder of the year, it is important to continue to build and broaden support on account-based plan issues and to prepare for the next Congress. We encourage you to reach out to your Representatives and Senators to urge them to cosponsor this important legislation.
Today the IRS announced it will treat expenses for breast pumps and supplies that assist in lactation as deductible medical expenses (Announcement 2011-14) through Section 125 Cafeteria Plans (including Flexible Spending Accounts, Health Savings Accounts, and Archer medical Savings Accounts).