On September 3, 2003, the Treasury Department and IRS announced
that over-the-counter drugs can be paid for with pre-tax dollars
through your cafeteria plan’s flexible spending account or Health
Reimbursement Arrangement (HRA)
– previously known as a
”
Medical Reimbursement Plan.
”
HRAs and cafeteria plans are important tools in helping
employees meet their health care costs
– providing incentives for better health care. Since many
prescription drugs have moved to the over-the-counter market, the
IRS and Treasury Department’s announcement is most welcome.
On September 3, 2003, the Treasury Department and IRS announced that over-the-counter drugs can be paid for with pre-tax dollars through your cafeteria plan’s flexible spending account or Health Reimbursement Arrangement (HRA) – previously known as a “Medical Reimbursement Plan.” HRAs and cafeteria plans are important tools in helping employees meet their health care costs – providing incentives for better health care. Since many prescription drugs have moved to the over-the-counter market, the IRS and Treasury Department’s announcement is most welcome.
This means that drugs previously available by prescription only are now available over the counter. In addition, pain relievers, cough syrup, antihistamines and other over-the-counter medications necessary for medical care, now qualify for reimbursement under your employer-sponsored HRA or cafeteria plan. This is especially important to employees with chronic health problems who seek relief by taking over-the-counter medicines.
Vitamins and dietary supplements, toiletries, cosmetics and other items that are not “medicines and drugs,” or items not necessary for medical care, do not qualify for reimbursement under these plans.
The IRS is quick to point out that, for purposes of the itemized medical expenses deduction, the cost of such over-the-counter drugs continues to be non-deductible on your individual income tax return (Form 1040.)
Bob Bianchi is a certified public accountant and partner with the accounting and business consulting firm of Bianchi, Lorincz and Company located in downtown Hollister.