Flexible Spending Arrangements (FSAs) have become less flexible. This year, consumers are required to obtain a doctor’s prescription to buy over-the-counter medications with FSA money.
The same rule applies for health-reimbursement arrangements (HRAs), health-savings accounts (HSAs) and Archer medical savings accounts (MSAs).
The provision, part of the Affordable Care Act passed last year, calls for no more tax-free purchases of over-the-counter cold and flu medications, pain relievers or allergy medications without a prescription. The lone exception is insulin, which can be purchased without a prescription.
As a result, FSA participants are advised to become less shy about asking doctors to write prescriptionsî șeven if it’s just for Tylenol: “It doesn’t cost anything extra to ask for a prescription; then you can use your FSA,” Melissa Labant, a tax manager at the American Institute of CPAs, told the Chicago Tribune.
However, purchasing such over-the-counter medications will be more of a hassle. According to IRS rules, participants will need to submit for reimbursement not only the receipt but the prescription, too. This is more complicated than simply buying aspirin using an FSA debit card.
The good news is that the rule pertains only to drugs and medicines. So FSA participants can still buy over-the-counter medical supplies such as crutches, medical-testing kits and joint supports without a prescription. Account money can also be used for Band-Aids, contact lens solution and hearing-aid batteries. Some plans allow the purchase of suntan solution with a sun protection factor (SPF) of more than 30 and even hand sanitizer. Large expenses such as eyeglasses and teeth braces are still allowed.
On average, over-the-counter medicines aren’t a big part of FSA spending. According to CBIZ, a professional-services company that processes 46,000 FSA claims a month, only 9% of FSA reimbursement claims, and only 3% of FSA dollars, are for purchases of over-the-counter drugs and medicines.
Another change with health FSAs will start in 2013, when the government will put a $2,500 cap on money that can be squirreled away in a health FSA, or half of what many companies allow account holders to put in today. Nearly 20% of FSA participants pledge more than that, CBIZ said. | 
