Tax Alert: Patient Protection and Affordable Care Act Amended to Conform Cafeteria Plans, Limit Reimbursements
6/21/2011
The Patient Protection and Affordable Care Act (“PPACA”), signed into law by President Obama in 2010, amended rules to conform cafeteria plans and limit reimbursement for over-the-counter (“OTC”) medications.
Amendments include:
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Amendment to Conform Cafeteria Plans
: PPACA has added Code Sec. 106(f), which revised the definition of “medical expenses” for employer-provided accident and health plans as they relate to over-the-counter drugs, effective after Dec. 31, 2010. This Code Sec. provides that, for purposes of Code Sec. 106 and Code Sec. 105, expenses incurred for a medicine or a drug shall be treated as a reimbursement for medical expenses only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin.
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Introduction of Reimbursement Limits for Over-the-Counter Medications from HSAs, FSAs, and MSAs: The new law excludes the costs for OTC drugs not prescribed by a doctor from being reimbursed through a health reimbursement account (“HRA”) or health flexible savings accounts (“FSAs”) and from being reimbursed on a tax-free basis through a health savings account (“HSA”) or Archer Medical Savings Account (“MSA”), effective for tax years beginning after Dec. 31, 2010.
An amendment to conform your cafeteria plan to the PPACA requirements must be adopted no later than June 30, 2011 and be made effective retroactively for expenses incurred after Dec. 31, 2010, or after Jan. 15, 2011 for health FSA and HRA debit card purchases.
For more information on these or other issues as they relate to you and your business, please contact your J.H. Cohn engagement partner at 877-704-3500.
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