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HRAs, FSAs, and HSAs May Now Reimburse OTC Medications

Sweeping legislation brought in response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), made narrow but robust changes to the rules regarding HRA, FSA, and HSA reimbursements. Funds in HRA, FSA, and HSA accounts may now be used to pay for over-the-counter drugs and medicines and menstrual care products. This new rule is effective for amounts paid or expenses incurred after December 31, 2019.

In 2010, the Affordable Care Act prohibited reimbursement by HRAs, FSAs, and HSAs of over-the-counter drugs and medicines without a prescription. Medicines, besides insulin, must have had a prescription in order to be covered. Under the new rules instituted by the CARES Act, however, over-the-counter medicines and drugs can now be covered without a prescription.

Additionally, the CARES Act adds menstrual care products to the list of qualified medical expenses, allowing HRAs, FSAs, and HSAs to be used to pay for these types of products. The law specifies that the definition of menstrual care products includes tampons, pads, liners, cups, sponges, or similar products used by consumers with respect to menstruation.

These changes are voluntary, so sponsors of these arrangements are still permitted to exclude these types of expenses form reimbursement if they wish. Once a decision is made regarding coverage of these expenses, trustees and plan professionals should review the plan document to determine if the current language in the plan needs to be amended to permit or disallow such reimbursements.

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