IRS Issues New Guidance on PPACA Changes to OTC Medical Expenses
The Internal Revenue Service issued guidance last Friday, September 3, 2010, in the form of Notice 2010-59 that reflects statutory changes regarding the use of health flexible spending arrangements (health FSAs) and health reimbursement arrangements (HRAs) to pay for over-the-counter medicines and drugs. A copy of the IRS Notice is attached for your convenience. This guidance is reproduced below at the end of this email and is scheduled to be published on September 27, 2010. PPACA revised the definition of medical expenses for employer-provided accident and health plans, including health FSAs and HRAs. PPACA also revised the definition of qualified medical expenses for Health Savings Accounts (HSAs) and Archer Medical Savings Accounts (Archer MSAs). Beginning after December 31, 2010, expenses incurred for medicines or drugs may be paid or reimbursed by an employer-provided plan, including a health FSA or HRA, only if
- the medicine or drug requires a prescription,
- is available without a prescription (an over-the-counter medicine or drug) and the individual obtains a prescription, or
- is insulin.