As mentioned in a previous SGR Client Alert, under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (together, the "Health Care Reform Legislation"), effective on January 1, 2011, an over-the-counter ("OTC") medicine or drug may not be reimbursed from a health flexible spending account ("health FSA"), a health reimbursement arrangement ("HRA") or a health savings account ("HSA") unless (1) the individual obtains a prescription for the OTC medicine or drug, or (2) the medicine or drug is insulin. Certain employers' cafeteria plans may need to be amended to conform to this new rule.
The Internal Revenue Service ("IRS") previously provided a transition period for cafeteria plan amendments to conform to the new OTC requirements. Specifically, the IRS stated that an amendment to conform a cafeteria plan to the new requirements regarding OTC medicines or drugs that is adopted no later than June 30, 2011 may be made effective retroactively for expenses incurred after December 31, 2010. Therefore, cafeteria plan amendments conforming to the new rules regarding OTC medicines or drugs must be adopted no later than June 30, 2011.