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.
Legal News Alert is part of our ongoing commitment to
providing up-to-the-minute information about pressing concerns or industry
issues affecting our clients and colleagues. If you have any questions about
this alert or would like to discuss the topic further, please contact your
Foley attorney or:
Leigh C. Riley