Enacted in 2010, the Patient Protection and Affordable Care Act included a rule prohibiting a health flexible spending account (FSA) or health reimbursement arrangement (HRA) from reimbursing over-the-counter drug expenses unless the drug is prescribed by a doctor or is insulin. This new rule applied to expenses incurred after December 31, 2010 (or with respect to debit card purchases, after January 15, 2011), regardless of whether the plan year for the FSA or HRA is a fiscal or calendar year and regardless of any applicable grace period in effect for the FSA.

Cafeteria plans, including FSAs and HRAs, may need to be amended to conform to this new rule. Although proposed cafeteria plan regulations prohibit retroactive amendments, the Internal Revenue Service has given plan sponsors until June 30, 2011 to retroactively amend their cafeteria plan documents to reflect the new rule.

If you have not yet amended your cafeteria plan, health FSA, or HRA to reflect the new rule, you should do so no later than the June 30, 2011 deadline. For most cafeteria plans, a simple one-sentence amendment is all that is needed.