IRS Expands When HFSAs & HRAS May Allow Over-The-Counter Drug Purchases With Drug Cards
IRS Notice 2011-5 modifies IRS guidance providing that HFSA and HRA debit cards generally could not be used after January 15, 2011 to purchase over-the-counter medicines or drugs after January 15, 2011, except with respect to "90 percent pharmacies." previously announced in Notice 2010-59
Under the new rules announced in Notice 2011-5, after January 15, 2011, the IRS has expanded the circumstances under which HFSA and HRA debit cards may continue to be used to purchase over-the-counter medicines or drugs depends on where and how they are purchased. Different conditions must be met if the over-the-counter drug is purchased with a drug card from a vendor that under IRS rules:
- Is a "90-percent pharmacy;"
- Has a "health care related Merchant Code;
- Is a non-health care merchant that has a pharmacy, or that sells prescription drugs via mail order or the web.
Where the applicable requirements established for each of these types of vendors is met, Notice 2011-5 permits HFSAs and HRAs to continue to allow participants to purchase over-the-counter drugs using debit cards after January 15, 2011. In contrast, if the vendor is not one of these types of vendors or is a listed vendor but the applicable requirements for allowing a debit card purchase of an over-the-counter medicine for that type of vendor are not met, HFSA and HRA debit cards may not be used to purchase over-the-counter medicines or drugs after January 15, 2011.
