Flexible Benefits FAQs

Expenses you incur for your general well-being, that are not primary for medical care, are not reimbursable. Over-the-counter (OTC) drugs and medicines will be considered ineligible expenses unless you have a Note of Medical Necessity (NMN) or a prescription from your physician. Examples include nutritional supplements, illegal operations and treatment, health club dues and cosmetic surgery (unless medically necessary). For a complete list of ineligible items, refer to Publication 502 on irs.gov.

Additionally, expenses may not be incurred before your program is effective, and may not be reimbursable through your health insurance.

Effective January 1, 2011, over-the-counter (OTC) drugs and medicines will be considered ineligible expenses unless you have a Note of Medical Necessity (NMN) or a prescription from your physician. Healthcare debit cards cannot be used to purchase OTC drugs and medicines. If a healthcare debit card is used to pay for these items after January 1, 2011, the transaction will be denied at the point of sale. In this case, you will need to pay for the expense out-of-pocket and submit a claim, along with an NMN or a prescription, to be reimbursed.

The IRS requires that expenses for medical procedures and services, and all OTC drugs be medically necessary in order to be eligible for reimbursement. This means they must be primarily to alleviate or prevent physical or mental defect or illness.

Some services or drugs may have dual purpose. For example, a procedure may generally be deemed cosmetic in nature but may also be used to treat a medical condition. In order to show that such a treatment is medically necessary, the IRS requires you submit a note from your provider, or a Medical Determination Form explaining your diagnosis and the recommendation for treatment.

For a list of services and OTC drugs requiring a Medical Determination Form, see the eligible expenses list. If your expense requires a letter for reimbursement, download the Medical Determination Form, have your provider complete the form, and submit it with your claim to SHDR.

In some cases, prescription drugs and medical services must be prescribed as medically necessary by your health care provider for those items to be reimbursable. A note from your provider listing the diagnosis of the medical condition and the treatment recommendation, called a Medical Determination Form must be submitted with your claim. Over-the-counter drugs also require a Note of Medical Necessity (NMN) from your provider.

Medically necessary OTC drugs may be considered eligible by the IRS and may be eligible for reimbursement under your plan. These expenses will require a Medical Determination Form from your health care provider listing the diagnosis of the medical condition and the recommendation of the OTC drug. Check the eligible expenses list for more details about reimbursement rules.

In some cases, the IRS requires that a drug or treatment be medically necessary in order to be eligible for reimbursement. Over-the-counter (OTC) drugs also require a Note of Medical Necessity (NMN) from your provider.

You may be required to submit a Medical Determination Form from your provider listing the diagnosis of the medical condition and the recommendation of the treatment with your claim in order to receive reimbursement. Some OTC items also require a letter from your provider.

The IRS requires that expenses for medical procedures and services and OTC drugs be medically necessary in order to be eligible for reimbursement from your HRA. This means they must be primarily to alleviate or prevent physical or mental defect or illness.

Some services or drugs may have dual purpose. For example, a procedure may generally be deemed cosmetic in nature but may also be used to treat a medical condition. In order to show that such a treatment is medically necessary, the IRS requires you submit a note from your provider, or a Medical Determination Form explaining your diagnosis and the recommendation for treatment.

HSA distributions are tax-free if used for IRS qualified health care expenses. Eligible health care expenses include services and items such as the following:

• Doctor's office visits
• Over-the-counter (OTC) medications if a doctor writes a prescription or provides a Note of Medical Necessity (NMN)
• Coinsurance
• Services not covered by insurance such as LASIK eye surgery

For a more detailed list refer Internal Revenue Code Section 213(d) on irs.gov.

Nonqualified distributions will be taxed as part of gross income and will incur a 20% penalty. After age 65, the 20% penalty is dropped, though the distribution is still treated as taxable income.

The 2010 and 2011 maximum annual contribution will be $3,050 for single coverage and $6,150 for family coverage. These amounts will be updated each year to account for inflation. Rollover amounts from previous years and/or Archer medical savings accounts (MSA) or another HSA do not count toward the maximum annual contribution. In 2010, individuals who are age 55 and older and not enrolled in Medicare (Part A or Part B) can contribute an additional $1,000.

Yes. Full year statutory contribution limits are permissible, but the HSA owner must maintain eligibility throughout the "testing period," which runs from the last month of the initial eligibility year through the end of the 12-month period following that month. In 2010 and 2011, limits are $3,050 for single coverage and $6,150 for family coverage.

If HSA owners are not eligible for this entire testing period, they must include in their gross income the contributions made for the months when they were not otherwise qualified. This amount will also be subject to a 10 percent penalty. The tax and penalty do not apply if the HSA owner is no longer HSA-eligible because of death or disability

If either spouse has family coverage under a QHDHP, both are treated as having family coverage. The 2010 and 2011 maximum statutory contribution limit is $6,150 for family coverage. Whether each spouse opens an individual account or one spouse opens an account, the collective total must not exceed the family maximum.

First, confirm that the retailer can accept FSA cards by reviewing our participating retailer list.

To find a retailer who can accept your Benefit Access Card, review the IIAS Merchant List.

Then, follow this process:

• Take prescriptions, vision products and other health care purchases to the register at checkout to let the clerk ring them up.
• Present your card or swipe it for payment.
• If the card swipe transaction is approved (e.g., there are sufficient funds in the account and at least some of the products are FSA-eligible), the amount of the FSA-eligible purchases will be deducted from your account balance. The clerk will then ask for another form of payment for the non-FSA-eligible items.
• If the card swipe transaction is declined, the clerk will ask for another form of payment for the total amount of the purchase. (File a claim for reimbursement for these expenses).
• The receipt will identify the FSA-eligible items and may also show a subtotal of the FSA-eligible purchases.
• In most cases, you will not receive requests for receipts for FSA-eligible purchases made in participating discount stores or supermarkets.