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Modifies the definition of qualified medical expenses for HSAs, FSAs, Archer MSAs and
HRAs to include insulin and any prescribed drug, even if the medicine is available over the counter (i.e., over-the-counter medications are a qualified medical expense that can be reimbursed or paid on a tax-free basis under these arrangements only if they are prescribed). Effective for taxable years after December 31, 2010.
The IRS issued guidance, Notice 2010-59, regarding the implementation of this provision and modified a portion of that guidance in Notice 2011-5 related to the use of health FSA and HRA debit cards in purchasing over-the-counter medicines or drugs.
An IRS Q&A updated on January 25, 2013, provides further information.
On Mar. 5, Reps. Lynn Jenkins (R-KS) and Ron Kind (D-OR) introduced the Restoring Access to Medication Act, which would repeal this section and enable pre-tax HSA, HRA, FSA and Archer MSA contributions to be used for over-the-counter medication purchases without a prescription.
SEC. 9003. DISTRIBUTIONS FOR MEDICINE QUALIFIED ONLY IF FOR
PRESCRIBED DRUG OR INSULIN.
(a) HSAS.—Subparagraph (A) of section 223(d)(2) of the Internal
Revenue Code of 1986 is amended by adding at the end the following:
‘‘Such term shall include an amount paid for medicine or
a drug only if such medicine or drug is a prescribed drug (determined
without regard to whether such drug is available without a
prescription) or is insulin.’’.
(b) ARCHER MSAS.—Subparagraph (A) of section 220(d)(2) of
the Internal Revenue Code of 1986 is amended by adding at the
end the following: ‘‘Such term shall include an amount paid for
medicine or a drug only if such medicine or drug is a prescribed
drug (determined without regard to whether such drug is available
without a prescription) or is insulin.’’.
(c) HEALTH FLEXIBLE SPENDING ARRANGEMENTS AND HEALTH
REIMBURSEMENT ARRANGEMENTS.—Section 106 of the Internal Revenue
Code of 1986 is amended by adding at the end the following
new subsection:
‘‘(f) REIMBURSEMENTS FOR MEDICINE RESTRICTED TO PRESCRIBED
DRUGS AND INSULIN.—For purposes of this section and section
105, reimbursement for expenses incurred for a medicine or a
drug shall be treated as a reimbursement for medical expenses only
if such medicine or drug is a prescribed drug (determined without
regard to whether such drug is available without a prescription) or
is insulin.’’.
(d) EFFECTIVE DATES.—
(1) DISTRIBUTIONS FROM SAVINGS ACCOUNTS.—The amendments
made by subsections (a) and (b) shall apply to amounts
paid with respect to taxable years beginning after December
31, 2010.
(2) REIMBURSEMENTS.—The amendment made by subsection
(c) shall apply to expenses incurred with respect to taxable
years beginning after December 31, 2010.
(202) 309-0796
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