As we continue to navigate through heath care reform and all of its changes, we aim to keep both you and your employees informed.

Over-the-counter (OTC) medications have been a hot topic for 2011 already this year, and it's only the second week of January. As you probably already know, you can no longer purchase OTC medications with Flexible Spending Account (FSA) funds unless you have a prescription from your doctor to substantiate the transaction. This is also true for Health Savings Accounts (HSAs), Health Reimbursement Accounts (HRAs), and Health Incentive Accounts (HIAs). The IRS recently updated their statutes to include a additional explanation of this issue, especially as it applies to the use of debit cards.

For expenses incurred in 2011, you can use a FSA (or HRA, HSA, or HIA) debit card to purchase over-the-counter medications or drugs so long as you obtain a prescription for the medicine or drug, the prescription is presented to the pharmacist, and the medication is dispensed by the pharmacist and given an Rx number.

You must obtain your OTC medication with a prescription through the pharmacy. If you try to pay for OTC medications outside of the pharmacy with your FSA debit card, it will be denied. If the prescription includes refills, you can refill them as you would any other type of prescription.

If, however, you are using a HSA debit card, you are able to purchase the item outside of the pharmacy because the transaction is not being substantiated by the administrator, and you are the owner of the account. Please note, however, that for tax purposes, you should have a prescription for OTC items purchased with your HSA funds.

Finally, we have put together an updated listing of eligible and ineligible expenses for Flexible Spending Accounts for you to share with your employees. This is also a useful reference document for employees with Health Savings Accounts. Click here for a printable version, or you can also view the document through our GO LIVE SMART website here. Use this document in place of IRS Code Section 213(d) Eligible Medical Expenses document.  

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