Summit Blog
Wednesday, October 13, 2010
Changes to Health Saving Accounts
On March 23, President Obama signed into law the Patient Protection and Affordable
Care Act. This act affects what an employee can claim under a health FSAs, Health Reimbursement Arrangements (HRAs) or Health Savings Accounts.
The definition of “medical expense” with respect to medicines, for purposes of Health FSAs, Health Reimbursement Arrangements (HRAs), Health Savings Accounts
(HSAs) is conformed to the definition used in determining the itemized deduction for medical expenses, except that “prescribed drug” is determined without regard to whether the drug is available without a prescription. This means that only the cost of medicine prescribed by a doctor and insulin can be reimbursed through a health FSA or HRA or on a tax-free basis through an HSA. This changes the current rule allowing such reimbursements for nonprescription drugs if the plan provides for it. This change only affects over-the-counter medicines, not other medical products, such as bandages, braces, etc., which can still be reimbursed on a tax-free basis. This change takes effect for tax years beginning after December 31, 2010. Also, salary reductions by an employee into a health FSA are limited to $2,500, effective for tax years beginning after December 31, 2012 (indexed for inflation after 2013 to the next lowest multiple of $50). This does not limit the exclusion for health coverage offered through an HRA.
So when filling out the 2011 heath deduction from please keep this information in mind.
Steven J. Kessler C.P.P.
Payroll Specialist
Summit HR & Payroll