Is the “Use It or Lose It” Fear with FSAs Gone?
The IRS announced that over-the-counter drugs (OTC) can be paid for with pre-tax dollars through health care Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs) effective immediately.
This is the biggest news for health flexible spending accounts in years! This news virtually eliminates the use it or lose it fear. Now employee can buy items at the end of the year to use up their remaining FSA balances. We have already heard of companies that are increasing the maximums for the FSA election to take advantage of greater FICA savings.
Items to alleviate or treat personal injuries or sickness will be covered under this new ruling. Examples of such items are: antacid, allergy medicine, pain reliever or cold medicines purchased without a physician’s prescription. Items purchased to promote good health are not covered under this new ruling. Examples of such items are dietary supplements (vitamins).
EMPLOYER IS STILL IN CONTROL:
Your company decides if and when OTC (over the counter) Drugs will be added to your plan. The option of OTC Drugs has been approved by the IRS but your company decides if it wants to allow employees to participate. We believe that this OTC ruling will give a positive boost to the use of FSAs and HRAs by assisting consumers in paying for over the counter drugs with pre-tax dollars. It will also help individuals who remedy chronic health problems by routinely taking an over-the-counter medicine.
MMMA continues to be in the forefront of health care changes. For more information on MMMA’s Advantage Health Plan on HRAs and FSAs, contact Sheelah at the MMMA office, 636-537-1360 or (800) 467-MMMA (6662), or by email to Sheelah@mmma.org.
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