New Guidance on use of Debit Cards for FSAs and HRAs

Notice 2011-5 provides new guidance on the continued use of debit cards for purchasing prescription drugs under health plans including FSAs, HRAs and HSAs.

Document Excerpt

.01 This notice modifies Notice 2010-59, 2010-39 IRB 396. Notice 2010-59 provides guidance on § 9003 of the Patient Protection and Affordable Care Act, Pub. L.No. 111-148, which added section 106(f) to the Internal Revenue Code. Section 106(f) revises the definition of medical expenses for employer-provided accident and health plans, (including health flexible spending arrangements (health FSAs) and health reimbursement arrangements (HRAs)) and for Health Savings Accounts (HSAs) and Archer Medical Savings Accounts (Archer MSAs). The notice explains that, after December 31, 2010, expenses incurred for a medicine or a drug shall be treated as a reimbursement for a medical expense only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin. Notice 2010-59 also provides that, except with respect to “90 percent pharmacies,” health FSA and HRA debit cards may not be used to purchase over-thecounter medicines or drugs after January 15, 2011.

 

Link http://www.irs.gov/pub/irs-drop/n-11-05.pdf

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