Q. How do the Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Tax Credits Reconciliation Act of 2010 (collectively known as the PPACA) affect health flexible spending accounts (FSA)?
A. The PPACA affects FSAs in two ways for tax years beginning after Dec. 31, 2010:
- FSAs cannot be used to reimburse the costs of over-the-counter medicines or drugs (other than insulin) that can be obtained without a prescription.
- There is a $2,500 cap on salary reduction contributions to an FSA offered through a cafeteria plan.