Prepare for 2011 – Changes in qualifying expenses for your FSA / HSA
The Affordable Care Act, signed into law in March 2010, created a new uniform standard effective on January 1, 2011 applying to what items are qualified for reimbursement from Flexible Spending Arrangements (FSAs) and Health Savings Accounts (HSAs).
Under the new standard, only the cost of prescribed drugs and insulin will be reimbursable. Over the counter medicine such as aspirin, cold remedies and medical related items will no longer be qualified expenses for FSA and HSA purposes.
The penalty for non-qualified distributions from HSAs increases from 10% to 20% in 2011. If FSA funds are used for non-qualified purchases, income tax will be due on the amount – no penalty assessed.
Employers and employees need to keep these changes in mind as they make their health benefit decisions for 2011.
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