IRS Permits Reimbursement of Over-the-Counter Drugs Under Flexible Spending Accounts
September 25, 2003
R. Gregory Bailey- Washington
Robert Friedman - Miami
The Internal Revenue Service recently issued a Revenue
Ruling (2003-102) of great importance for companies and organizations that
currently have or are considering the addition of a health care Flexible
Spending Arrangement (FSA) option in their employee benefits portfolio. FSAs
allow participants to contribute pre-tax funds into an account which can be
utilized to pay for medical costs, such as vision and dental care, which are not
covered under other group health plans.
One of the more utilized benefits under an FSA is the
reimbursement of prescription drug costs. However in Revenue Ruling 2003-102,
the IRS announced that over-the-counter medications such as antacids, pain
relievers, allergy medication, and cold medication acquired without a doctor’s
prescription for the personal use of the participant, his or her spouse, or
dependent may also now be reimbursable under FSAs. The ruling further explained
that the claims would have to be properly substantiated. Dietary supplements
such as vitamins obtained without a physician’s prescription to maintain the
“general health” of the participant, their spouse, or dependent will still not
be reimbursable.
As most companies will begin their employee benefits open
enrollment for 2004 in the coming months, it is advisable that they thoroughly
review and consider modifying their plan documents and open enrollment
communication materials to reflect the recent changes. Our Employee Benefits
group can assist with any questions or concerns you may have about these recent
changes in the law.
For more information please e-mail Robert J. Friedman, R.
Gregory Bailey or Maria D. Lumb at robert.friedman@hklaw.com, greg.bailey@hklaw.com
and maria.lumb@hklaw.com, respectively, or call toll free, 1-888-688-8500.
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