On December 23, 2010, the IRS issued Notice 2011-5, which provides guidance that allows the continued use of health FSA, HRA and Archer MSA debit cards for the purchase of prescribed OTC medicines and drugs.
In September 2010, the IRS issued Notice 2010-59, which provided a uniform definition of a reimbursable expense for FSAs, HRAs, and Archer MSAs. A key part of this new standard definition was that OTC medicines could not be reimbursed by FSAs, HRAs, or Archer MSAs unless the participant had a prescription for the item. As a result of this guidance, debit card vendors of such accounts (debit cards for the sole purpose of reimbursement from an FSA, etc.) were no longer going to allow the plan debit cards to be used to purchase OTC items after January 15, 2011.
Notice 2011-5 provides that FSA, HRA, and Archer MSA debit cards may be used to purchase OTC medicines at drug stores and pharmacies, non-health care merchants that have pharmacies, and at mail order and Web-based vendors that sell prescriptions, as long as certain requirements are met.
You still must have a physician’s prescription for each item. And remember, even if you can used the first 75 days of 2011 for expenses to be taken from your 2010 FSA, that normal extension does not apply to OTC medicines so it is too late to purchase any such items without a prescription.
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