26 December 2010

IRS Eases FSA Debit Card Rules

According to National Underwriter, the IRS says that personal health account debit card users can still use the card to buy doctor-prescribed over-the-counter (OTC) drugs at a wide range of stores after January 15, 2011. IRS Notice 2011-5 changes the prior requirement in IRS Notice 2010-59 that OTC drugs can only be purchased at retailers with ‘inventory information approval systems’ (HAS). Now, FSA and HRA cards can be used to buy OTC drugs without submitting receipts at many retailers that simply save information about the transactions. One new set of rules will apply to ordinary drug stores, other types of retailers that have pharmacies, and mail-order and web-based vendors that sell prescription drugs. A second, looser set of rules will apply to retailers that have health card merchant cards built into their debit card systems buyt have no pharmacy operations. The IRS wants to apply another set of rules – the rules given in Notice 2010-59 – to 90% pharmacies, or pharmacies that get 90% of gross receipts from the sale of items that the IRS classifies as medical items.