Cafeteria plans that have not yet been amended to reflect the new over-the-counter drug requirements in relation to certain tax-favored arrangements as provided under the Affordable Care Act have until June 30, 2011 to adopt the changes.

Changes to Over-the-Counter Drug Requirements 

Effective Jan. 1, 2011, the Affordable Care Act provides that the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements (FSAs) or health reimbursement arrangements (HRAs) unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles.


The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer's plan.


Note: A similar rule went into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs).

June 30 Deadline to Conform Cafeteria Plans  

Although cafeteria plan amendments generally may be effective only prospectively, IRS Notice 2010-59 provides that an amendment to conform a cafeteria plan to the new over-the-counter drug requirements that is adopted no later than June 30, 2011, may be made effective retroactively for expenses incurred after Dec. 31, 2010.

Additional Information 

For more on the changes to the use of HSAs, Archer MSAs, FSAs and HRAs to pay for over-the-counter medicines and drugs, please click here. You may also view FAQs from the IRS here. To learn more about the Affordable Care Act, please visit the HR360 Health Care Reform section. 

Topics: Employee Benefits, Health Care Reform

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