The new health care reform law resulted in some changes in the way health care Flexible Spending Accounts (FSA) will work.
You can help employees make the most of current FSA benefits and plan future health spending by letting them know about the following changes.
New limits on FSA coverage
Beginning on Jan. 1, 2011, all over-the-counter (OTC) medications except insulin will require a doctor’s prescription in order to be reimbursed through an FSA. That means employees who can afford to should buy some meds now—before the end of the year.
You can help employees manage their FSA benefits by reminding them to:
• Shop now to stock up on OTC items that can’t be prescribed. OTC products—pain relievers, antacids and so forth—purchased before Jan. 1 are eligible for FSA reimbursement. Not so for items purchased after the New Year, even under 2010 plans’ grace periods that extend into 2011.
Note: Recent guidance issued by the IRS indicated that items that are not medicines or drugs—like crutches, bandages and test kits—are still eligible for FSA reimbursement. For details, visit www.irs.gov/pub/irs-drop/n-10-59.pdf.
• Request necessary prescriptions from their doctors before the end of the year. That way, they’ll be able to anticipate any new costs and budget appropriately. If employees have use-it-or-lose-it funds remaining at the end of the year, employees may want to purchase some of next year’s meds now, assuming it is legal to do so.
Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) will also follow the same rules.
More FSA limits in 2013
Now is the time for employees to plan ahead for expensive or elective health procedures. Beginning in 2013, there will be a $2,500 cap on annual FSA contributions.
If employees have a procedure they have been delaying, like LASIK eye surgery or braces for a child, 2011 is a great year to set aside money for it in an FSA. That will help ensure they get the benefit of FSA tax advantages before they go away.
Advice: Contact your FSA provider for assistance in communicating with employees about the new rules.