Flexible Spending Accounts: New IRS Ruling

Abstract

Last September, the IRS announced that consumers can pay for over-the-counter (OTC) drugs with pretax dollars through health care flexible spending accounts (FSAs) provided by employers' benefit programs. Typically, FSAs provide only for prescription drugs and medical expenses not covered by insurance. As more prescription drugs are moving to OTC status, which is costlier than the prescription copay premium, the ruling comes as a salvation for chronic sufferers of heartburn and allergies, among other aliments. Additionally, it is a bright spot for employers who offer FSAs but have decreased supplementary benefits because of rising costs, but need to retain valued employees.