Recent IRS Guidance Regarding Use of Debit Cards
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Topics: debit, evolution, fsa, hsa, irs, law, prescription, travisflex
For our TravisFlex customers that utilize the Evolution Debit Card module, this recent guidance by the IRS is important information.
The IRS recently announced that health flexible spending arrangements (FSAs) and health reimbursement arrangements (HSAs) may continue to utilize debit cards for the purchase of prescribed over-the-counter medications and drugs. IRS Notice 2011-5 represents a change in position, because the IRS had previously issued a notice prohibiting the use of health FSA and HRA debit cards for purchases of over-the-counter medicines or drugs. As you may be aware, effective on and after January 1, 2011, distributions from health FSAs and HRAs will be allowed to reimburse the cost of over-the-counter medicines or drugs only if they are purchased with a prescription (except for insulin). For purposes of this Notice, a “prescription” means a written or electronic order for a medicine or drug that meets the legal requirements of a prescription in the state in which the medical expense is incurred and that is issued by an individual who is legally authorized to issue a prescription in such state.
Specifically, Notice 2011-55 provides that after January 15, 2011, health FSA and HRA debit cards may continue to be used to purchase over-the-counter medicines or drugs if: (1) prior to the purchase – (i) the prescription for the over-the-counter medicine or drug is presented to the pharmacist, (ii) the over-the-counter medicine or drug is dispensed by the pharmacist in accordance with applicable law and regulations pertaining to the practice of the pharmacy, and (iii) an RX number is assigned; (2) the pharmacy retains a record of the Rx number, the name of the purchaser, and the date and amount of the purchase; (3) all records are available to the employer or its agent upon request; (4) the debit card system does not accept a charge for an over-the-counter medicine or drug unless an Rx number has been assigned; and (5) the procedures follow certain other related requirements. If these requirements are met, the debit card transaction will be considered fully substantiated at the time and point-of-sale.
For additional information regarding the IRS Notice 2011-5 (Dec. 23, 2010), please refer to the following links:
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