ACA News & Publications

Cafeteria Plan Amendment – OTC Drugs and Medicines

June 8, 2011

As previously reported, beginning January 1, 2011, expenses incurred for medicines or drugs may be reimbursed from a health care flexible spending arrangement (FSA), health savings account (HSA), Archer medical savings account (Archer MSA) or health reimbursement arrangement (HRA) only if the medicine or drug requires a prescription, the drug is available over-the-counter but the individual obtains a prescription, or the drug is insulin.

Cafeteria plan documents must conform to the new over-the-counter drug requirements. In general cafeteria plan amendments may be effective only prospectively. However, IRS Notice 2010-59 ( 10-59.pdf) states that, notwithstanding the general rule against retroactive amendments, an amendment to conform the cafeteria plan to the new OTC drug requirements that is adopted no later than June 30, 2011, may be made effective retroactively for expenses incurred after December 31, 2010 (or after January 15, 2011 for health FSA and HRA debit card purchases).

What You Need To Do

By June 30, 2010 if your plan reimbursed over-the-counter medicines or drugs:

  1. Amend your cafeteria plan document to reflect the changes in over-the-counter drug and medicine requirements.
  2. Update your Summary Plan Description to include these changes.
  3. Distribute the updated Summary Plan Description to employees.
  4. If you use a third party administrator to process claims (including debit card purchases), confirm with the administrator that the new rules on over-the-counter drugs and medicines have been implemented, and provide the administrator with an updated copy of the cafeteria plan document and Summary Plan Description.

For More Information
For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:

Burnham Benefits

This ACA Pathways is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

The information contained in this ACA Pathways includes emerging health care news from a limited perspective and does not encompass all views. The information was selected from a wide range of sources selected on the basis of their potential impact on employers and/or their employee benefit plans. For more information, please contact Burnham Benefits.

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