| Issue: |
Your health flexible spending account (FSA) includes a grace period, which gives participants an additional two and one-half months after the end of the plan year to incur qualified expenses before unused balances are forfeited under the “use-it-or-lose-it” rule. For the 2010 plan year, the grace period runs from January 1, 2011, through March 15, 2011. While federal health reform generally prohibits FSA reimbursement of over-the-counter drugs purchased in 2011, can individuals taking advantage of the grace period still get reimbursed because they are drawing on unused contributions from 2010?
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Answer: |
No, for expenses incurred in tax years beginning after December 31, 2010, over-the-counter drugs may not be reimbursed from an FSA, unless they are prescribed drugs or insulin. The fact that the amounts would be reimbursed from unused 2010 contributions has no effect, since the drugs are purchased in 2011.
Source: Code Sec. 106, as amended by Act Sec. 9003(c) of the Patient Protection and Affordable Care Act (P.L. 111-148).
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