HSA and OTCs

[Guest mmclees]

I have read conflicting information regarding the eligibility of over-the-counter meds reimbursed through a HSA. Are they eligible?

[leevena]

Hi.

Yes, otc can be run through the hsa plan. See IRS publication 969, page 6, subsection entitled "Qualified medical expenses", which states, "qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. (These are in Pub 502) Medical and Dental expenses examples innclude amounts paid for doctors fees, prescription and non-presciption medicines, and necessary hospital services not paid by insurance.

Good luck.

[Guest chloe]

The confusion is coming from a change in interpretation by the IRS. They had always said that OTCs were not reimbursable, but someone finally challenged that and won. Refer to Revenue Ruling 2003-102 which explains that OTCs are excludable and may be reimbursed through an FSA, HRA or HSA.

[jmor99]

To add to what chloe has said, many HSAs will be run thru a 125 plan, which usually reference sec. 213 expenses (outlined by pub. 502). Section 213 does not allow for otc stuff. Thus the 125 plan doc. and SPD will have to be amended to also reference or allow for sec. 105 expenses, which includes otc stuff (as noted by RR 2003-102). If you've got late model docs (within last 2 years), it's likely in there. If older, better check.

Edit: I've just had an expert consultant tell me that it's not necessary to amend docs. However, how will you communicate to the employees? If you tell them to see Pub. 502, otc won't be in there. So somehow, additional info has to be given to the employees so they will know which items are and aren't eligible, usually thru the SPD.