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Flexible spending account changes go into effect Saturday

Posted December 29, 2010

— Beginning Saturday, people with flexible spending accounts will not be able to buy approximately 15,000 medications that they’re currently allowed to purchase.

Flexible Spending Accounts: What is and is not eligible

Flexible spending accounts allow people to set aside pre-taxed money, mainly to be used for medical expenses. Under the national health care reform law, however, medications bought over-the-counter – like allergy medication, pain relief pills and antacids – won't be covered unless purchased with a doctor's prescription. The only exception is insulin – which will not require a prescription. 

Items used for health and well-being that are not medicines – like bandages and nasal strips – still qualify as FSA spending and will not require a prescription.

Financial journalist Vera Gibbons, who blogs for WalletPop.com, advises people to load up on over-the-counter medications, buy glasses and other items now. If any money is left in this year’s account, those people will lose it.

Another change is coming in 2013, when employees will be limited to $2,500 in a flexible spending account each year. Most employers currently allow up to $5,000 in an employee's account.

The IRS estimates more than 33 million Americans own some version of a tax-exempt medical account.

45 Comments

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  • prissygurl Jan 3, 1:52 p.m.

    Unlike many private businesses, the enrollment period for benefits for state employees is usually in May. I just don't know how they can get away with this when many state employees do not re-enroll until May. This should have been told to us BEFORE we re-enrolled and decided how much to put on our card.

  • NCPictures Dec 30, 2:52 p.m.

    "It is a bit more work for patient/doctor to have to get prescription for OTC. But you don't pay taxes on prescriptions anyway, so the Feds are hoping you will not bother to get prescriptions for OTC. I would think most docs would be willing to call in OTC meds without a visit. Most OTCs will not go through insurance so ins doesn't benefit. So you saved taxes anyway at the time of purchase. I doubt there will be a lot of tax rev created by this but they are counting on us to not bother with prescription OTC meds. And it will be a pain to have to go to the pharmacy every time we need vitamins, etc. Get a prescription for the meds that are more essential and used regularly." ----mamacass

    This is EXACTLY what causes healthcare to go higher and higher. SOMEONE has to pay for this paperwork, so it will end up being the doctor or hospital as they will need to hire a person the handle the calls and paperwork. Therefore your healthcare goes up.

  • carolinarox Dec 30, 12:56 p.m.

    Oh, that's right, that could never happen to the annointed one, just ask Rev. Wright or Bill Ayers, Bernadine Dorn or any of his pulit bureau. jp11

    Will you hold my peter and pullet while I scratch my, um donkey?

  • carolinarox Dec 30, 12:52 p.m.

    So its pre tax money that goes into it. Any unused portion can't be given back to the employee taxed or not. Where does it go? The FSA administrators, which in my experience do everything they can to deny your expenditures. It really is like pulling teeth just to get them to accept payments to a dentist as a medical expense. Just get rid of the whole thing and pay us more. godnessgracious

    Either an expense qualifies or does not qualify under FSA guidelines, they're quite clear. The only thing an FSA admin can question is the receipt or lack of a receipt, not the expense itself. If someone doesn't use all their FSA contribution, the remaining money goes to their employer, not the FSA admin. The whole idea of the prescription for OTC drugs isn't as bad as what some people are making it out to be and once you have the prescription, you buy the OTC drugs as always (not through the pharmacy) and send a copy of the prescription along with the receipt and substantiation form to the FSA admin

  • carolinarox Dec 30, 12:45 p.m.

    @mamacass -- You have to have the written prescription and send along with the substantiation to FSA, you won't have to go through the pharmacy to get your OTC drugs. It won't be that big of a deal once you obtain the prescription, just send it along with the receipt. Also, it is the states that benefit from the taxes on OTC drugs, not the feds.

  • dmr9321 Dec 30, 11:06 a.m.

    Just switch to an HSA account and forget the FSA accounts....

  • mamacass Dec 30, 10:08 a.m.

    It is a bit more work for patient/doctor to have to get prescription for OTC. But you don't pay taxes on prescriptions anyway, so the Feds are hoping you will not bother to get prescriptions for OTC. I would think most docs would be willing to call in OTC meds without a visit. Most OTCs will not go through insurance so ins doesn't benefit. So you saved taxes anyway at the time of purchase. I doubt there will be a lot of tax rev created by this but they are counting on us to not bother with prescription OTC meds. And it will be a pain to have to go to the pharmacy every time we need vitamins, etc. Get a prescription for the meds that are more essential and used regularly.

  • tsquaring Dec 29, 7:13 p.m.

    it's a pity that these changes are coming. thanks barry... :-(

  • whatusay Dec 29, 5:48 p.m.

    This allows the government more tax revenues by reducing the amount people put into the FSA. More take home income, more taxable income. What a bummer.

  • dlk13ster Dec 29, 4:59 p.m.

    "I would rather they eliminate the exemption of FSAs altogether."-yourkillingme

    Now that, at least, is a consistently conservative stance. I might disagree with you (I really don't know enough about FSAs to judge their merit or worth), but I can at least applaud this statement as being rational and in-keeping with a fiscally responsible policy.

    Whether this will even make a dent in the debt, deficit, or health care costs remains to be seen. But from what I've been able to gather this, will at least help pay for part of the larger health care bill (the merits of which can be/are discussed elsewhere).

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