Posted on 09/10/2010 6:52:27 AM PDT by In Maryland
IRS Issues Guidance Explaining 2011 Changes to Flexible Spending Arrangements
IR-2010-95, Sept. 3, 2010
WASHINGTON — The Internal Revenue Service today issued guidance reflecting statutory changes regarding the use of certain tax-favored arrangements, such as flexible spending arrangements (FSAs), to pay for over-the-counter medicines and drugs.
The Affordable Care Act, enacted in March, established a new uniform standard that, effective Jan. 1, 2011, applies to FSAs and health reimbursement arrangements (HRAs). Under the new standard, the cost of an over-the-counter medicine or drug cannot be reimbursed from the account unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan.
A similar rule goes into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs).
Employers and employees should take these changes into account as they make health benefit decisions for 2011.
For details on current rules, see Publication 969 , Health Savings Accounts and Other Tax-Favored Health Plans.
Updates on this and other health care reform provisions can be found on the Affordable Care Act page on IRS.gov. Notice 2010-59 and Revenue Ruling 2010-23, posted today, further explains this change.
For those not familiar, flexible spending accounts (for healthcare) are a benefit employers may offer. It allows an employee to put up to $5000 (per family) of pre-tax money into an account out of which you may be reimbusered for out-of-pocket healthcare costs, such as co-pays, deductables, etc. Currently you can also be reimbursed for the cost of over the counter medications - these can range from cough syrup and aspirin to patented medications (for instance a number of the long term acid reducers) that used to require a prescription, but are now OTC.
So the "Affordable Health Care Act" is now going to make sure you can't buy those medications using pre-tax dollars (unless you have a prescription - which usually means paying for a doctor's visit)- effectively making them more expensive. This tax increase will fall disproportionately on uninsured and lower-income workers, who depend on these medications as a way to avoid costly doctor's visits.
So here is ObamaCare in a nutshell - making health care more expensive, driving more people into doctor's offices, and providing financial incentives for insured patients to demand more costly prescription drugs from their doctors. No wonder they had to pass it in the middle of the night! And no wonder the drug companies were big supporters of this piece of excrement!
The guidance is probably about 20,000 pages.
The word NOT should be attached to every bill passed by congress
Affordable Health Care NOT act.
Families of special needs kids are pissed....
Medical deductibility goes from a threshold of 7.5% AGI to 10% AGI.
Also the tax on medical appliances.
Again special needs families are pissed.
I wouldn’t be surprised - if they make it difficult enough for employers to administer, many employers will simply stop participating. Thus eliminating a tax-break that effects everyone, but ... let’s face it - Donald Trump isn’t overly worryied about losing a tax break on $5000; Joe the Plumber is. And, if you don’t work and the gubmint pays for your health care, you won’t care either. This is aimed straight at the pockets of working men and women.
Actually, I don't think either figure is correct as a matter of law - the maximum amount is established by the employer when they set up the plan. My employer has a $5000 limit; it sounds like your employer is changing the limit. [If I am incorrect, feel free to post a citation to the correct information; remember that I am addressing the Flexible Spending Accounts for healthcare, not the Medical Savings Accounts, which are different.]
This is from the Bureau of Labor Statistics:
http://www.bls.gov/opub/cwc/cm20031022ar01p1.htm
"Health care flexible spending accounts are employer-established benefit plans that reimburse employees for specified medical expenses as they are incurred. These accounts are allowed under section 125 of the Internal Revenue Code and are also referred to as "cafeteria plans" or "125 plans." The employee contributes funds to the account through a salary reduction agreement and is able to withdraw the funds set aside to pay for medical bills. The salary reduction agreement means that any funds set aside in a flexible spending account escape both income tax and Social Security tax. Employers may contribute to these accounts as well.
There is no statutory limit on the amount of money that can be contributed to health care flexible spending accounts. However, some companies place a limit of $2,000 to $3,000 on flexible spending accounts."
How is the removal of OTC medications, and changing the threshold for other expenses going to REDUCE health care costs to individuals and families?
When the people here in Arkansas put together a Constitutional amendment or initiated act, it has to go through legal scrutiny to make certain that the bill’s title is not “deceptive or misleading”.
Yet Obama’s “Affordable Care Act” is, from what it appears to my eyes, to be increasing costs for me and my family.
Can we not bring charges of fraud against the president and all members of congress who voted for this bill - because it IS a fraud.
No the Obamaton's have changed the maximum contributions to FSA's from $5,000 to $2,500....
It was part of Obamacare and it kicks in in 2011...
Look into it...
It used to match our deductible -— I blew through $9000 this year for child surgery, wife surgery, and my various recurring sports injuries (I am a crazy weightlifter), even with excellent insurance (because I own the company, I pick my coverage).
“I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”
Needs repeating often.
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