Over-The-Counter Medicines & Drugs
Q. Can I be reimbursed tax-free for over-the-counter drugs (OTC) through my flexible spending account (FSA)?
On September 3, 2003, the Treasury Department and IRS (Revenue Ruling 2003-102) declared that employer-sponsored health plans can reimburse expenses for medicines available without a prescription, provided the expense is properly substantiated (e.g. receipt) and that the medicines are for treating personal injuries or sickness.
Q. My health care plan now allows me to be reimbursed for OTC drugs. Can I be reimbursed for OTC drugs before the IRS ruling (Rev. Rul. 2003-102)?
It depends on your health plan. Those plans that include eligible reimbursements and not just deductible medical care expenses under Section 213 of the tax code are required to reimburse OTC drug expenses that occurred back to the first day of your plan year.
Q. My health care plan specifically excludes reimbursements for OTC drugs. Does the IRS ruling entitle me to start receiving OTC reimbursements now?
Although in these cases you can not be reimbursed back to the start of the plan year, your healthcare plan can be amended to allow reimbursements on a tax-free basis by your employer’s health FSA for OTC drugs after the date of the amendment.
Q. What do I need to be reimbursed for an OTC drug claim?
Regardless of the cost of the OTC drug, you need to complete a reimbursement request/claim form that details who the expense is for (employee, spouse, depdendent) and a receipt for your OTC drug purchase that identifies either the name (i.e. “Robitussin”) or type (i.e. “cold medicine”) of the OTC drug, the price paid and the date the purchase was made. This receipt must come from a third party such as a store or pharmacy. Other documentation, such as a box-top, may be needed if the receipt does not identify either of the above. Note that writing the name of the drug or type is not enough to substantiate a claim. Note also that the drug must be legal and procured legally. For example, it is currently illegal to import drugs from Canada or Mexico.
Q. Are items such as medicated shampoos, lotions and sunscreens eligible for reimbursement.
For items like these that can be used for both medical and nonmedical reasons, you would be required to provide documentation from your doctor stating that the products is used to treat a specific medical condition.
Q. Are dietary supplements like vitamins I purchase to stay healthy reimbursable?
No. These are not reimbursable on a tax-free basis by your health care flexible spending account.
Q. Can I buy multiple amounts of the same OTC drugs so I can store some for later use?
Not necessarily. A health care plan may reimburse you for a reasonable amount of expected buying, say two or three bottles of Ibuprofen but not for stockpiling the OTC drugs.
Q. Now that I can be reimbursed for OTC drugs, I want to increase my flexible spending account contributions even though it is in midyear. Can I do this?
No. You can not make a midyear election change based on the IRS ruling.