Guess what I found out today? There are new federal rules governing the use of flexible spending account (FSA) benefits. Per official IRS Publication 969:
What’s New for 2011
Qualified Medical Expenses. For HSA, MSA, FSA, andHRA purposes, a medicine or drug will be a qualified medical expense only if the medicine or drug:
1. Requires a prescription,
2. Is available without a prescription (an over-the-counter medicine or drug) and you get aprescription for it, or
3. Is insulin.
This applies to amounts paid after 2010. However, it doesnot apply to amounts paid in 2011 for medicines or drugspurchased before January 1, 2011.
Before this year, there were any number of eligible over-the-counter products that you could use your FSA benefits for. (Remember, a flexible spending account is money that you ask your employer to withhold, pre-tax, from your paycheck, which can only be used for medical expenses.) Now, every single one (except insulin) requires a prescription.
Insanity.
Mostly I’m upset because—barring a low-level medical crisis—I’ve apparently grossly overcalculated my “qualified medical expense” for this year, if I can’t use my FSA to cover my OTC allergy meds, Band-Aids, ibuprofen, cold medicine, etc., which makes most of the money in my account wasted, thrown away, useless (since you can’t ask for it back once it’s been earmarked at the beginning of the year).
OH MY GOD I AM SO FURIOUS.
Guess I should’ve attended this year’s FSA informational session at work after all!
I am not a CPA, but it isn’t exactly true that *every single* OTC product needs a prescription — just the ones that are medicines and drugs. Unfortunately, that only gets you your band-aids (from your list).
See the question about over-the-counter medical devices and supplies: http://www.irs.gov/newsroom/article/0,,id=227308,00.html
But yeah, this is a huge bummer.
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Oops, you’re right, Band-Aids are still okay. I’m just so annoyed that I have to get my doctor to sign off on every FSA purchase I make—in other words, I have to pay a co-pay in order to spend this money. Ugh. Guess I need to start taking lists of “prescription items” to my doctor’s appointments.
Bastards!
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