Changes for your flexible spending account

July 29, 2010 4:00:59 PM PDT
If you have a tax-free medical flexible spending account (FSA), there are some changes coming that you may not know about. A number of over-the-counter medications will no longer be covered by the accounts. A lot of folks use the flex spending accounts to stock up on over-the-counter medications. If you do that, you need to know about the changes coming January 1.

Flexible spending accounts have allowed consumers to use them in two ways. They can use tax-free money for medical expenses, as well as buying a whole host of over-the-counter drugs and supplies. But now a portion of the program is about to change.

As of January 1, consumers with an FSA will no longer be able buy certain over-the-counter drugs and supplies. For instance, acne medicine, allergy medicine, cough, cold and flu medicine, eye drops and pain relievers will not be available to buy using an FSA. You can still get bandages and contact lens solutions, even reading glasses, but the pain relievers will be ineligible starting January 1.

Tamara McCormick uses her FSA to buy skin care products that will be ineligible expenses in January.

She said, "I do use Mederma, so that would affect me, the skin care products."

The new over-the-counter rules go into effect January 1. Even if your company gives you a grace period to use your flex account dollars, you won't be able to purchase non-eligible over-the-counter medications using an FSA. Instead you'll need to see a doctor first.

Dr. William Gilmer with the Harris County Medical Society explained, "You must have a doctor's prescription even for something like Ibuprofen or other over-the-counter medication, that's the bottom line."

Because consumers lose the money in their flex spending account if it is not used, the January 1 changes mean if someone wants to stock up on over-the-counter medications, they must do so before the new year.

If you have an FSA and your doctor recommends an over-the-counter medication, be sure to get it in writing.

"The rules and regulations have not been written yet. We have the bill of 2,300 pages and now there are going to be 23,000 pages of regulations, so we don't know," Dr. Gilmer said.

There are other changes coming to FSA accounts that limit how much you can put in them, and that could influence your decision to have certain types of medical procedures.


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