Note: This should not be taken as tax or legal advice.
The new guidance modifies previous guidance to permit taxpayers to continue using FSA and HRA debit cards to purchase over-the-counter medications for which the taxpayer has a prescription. Effective after Jan. 15, 2011, in accordance with the new guidance, this use of debit cards must comply with procedures reflecting those that pharmacies currently follow when selling prescribed medicines or drugs.
The procedures include requirements that a prescription for the medication be presented to the pharmacy or the mail-order or web-based vendor that dispenses the medication and that proper records be retained.
In accordance with the Affordable Care Act, the cost of over-the-counter medicines or drugs can be reimbursed from a health FSA or HRA if a prescription has been obtained. The requirement to obtain a prescription does not apply to insulin.
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Note: None of this should be taken as legal or tax advice.
The IRS recently released
Notice 2010-59 providing guidance on the Affordable Care Act provisions that changed the substantiation requirements for over-the-counter (OTC) drugs. These changes apply to
flexible spending accounts (FSAs),
health reimbursement arrangements (HRAs) and
health savings accounts (HSAs).
Beginning January 1, 2011, the following substantiation for OTC medicines and drugs will be required:
- a receipt that identifies the purchaser along with an RX number, or
- a receipt showing the item purchased along with a copy of the prescription.
A doctor's prescription is defined as a document that meets the legal requirements of a prescription in the state in which the medical expense is incurred. It also must be issued by an individual who is legally authorized to write a prescription in that state.
According to the Special Interest Group for IIAS Standards (SIGIS), approximately
one-third of the IIAS list will no longer be payable with an HRA debit card.
This further complicates an already confusing experience for HRA debit-card holders...
- If the card-holder visits an IIAS-qualified Pharmacy, then the card-holder can use the debit card to purchase prescription drugs only. The card-holder cannot use the debit card to purchase OTC medicines and drugs that require a prescription.
- If the card-holder visits a non IIAS merchant (e.g. doctor, hospital, non-IIAS-qualified pharmacy etc.), then the card-holder must manually submit documentation (e.g. receipt) to confirm the items purchased were eligible expenses.
