The Patient Protection and Affordable Care Act (“health care reform”) added section 106(f) of the Internal Revenue Code, which generally restricts reimbursable drugs or medicines to prescription drugs, over-the-counter drugs or medicines for which the participant has a prescription, or insulin. (Previously, over-the-counter drugs or medicines could be reimbursed from a health flexible spending arrangement if they were purchased for medical care.) While the new rule generally became effective for expenses incurred on or after January 1, 2011, in Notice 2010-59 the IRS provided that employers had until June 30, 2011 to amend their health flexible spending arrangement plan documents (whether stand-alone or part of a cafeteria or 125 plan). See IRS Notice 2010-59, 2010-39 I.R.B. 396 (Sept. 27, 2010).

All health flexible spending arrangement plan documents that reimburse over-the-counter drugs or medicines must therefore be amended for compliance by June 30, 2011 to reflect the new restrictions. Effective as of January 1, 2011, health care reform provides that over-the-counter drugs and medicines cannot be reimbursed from a health flexible spending arrangement unless the individual seeking reimbursement has a prescription for the over-the-counter drug or medicine. A health flexible spending arrangement is not required to permit reimbursement of over-the-counter drugs and medicines, but if it does, compliance with the rule was required beginning January 1, 2011 and the plan must be amended to reflect the rule by June 30, 2011.

Employers should review their plans to confirm whether the plan has been amended.