Guidance explaining 2011 changes to flexible spending arrangements.

• Position: IRS NEWS

The IRS has issued guidance reflecting statutory changes regarding the use of certain tax-favored arrangements, such as flexible spending arrangements, to pay for over-the-counter medicines and drugs.

The Affordable Care Act, enacted in March, established a new uniform standard that, effective Jan. 1, 2011, applies to flexible spending arrangements and health reimbursement arrangements. Under the new standard, the cost of an over-the-counter medicine or drug cannot be reimbursed from the account unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and...