Legal Alert: IRS Issues Guidance on Health FSA and HRA Debit Card Use for Over-the-Counter Drugs


On December 23, 2010, the Internal Revenue Service issued Notice 2011-5, new guidance regarding the use of health FSA and HRA debit cards for purchases of over-the-counter medicines or drugs. Under previously issued IRS guidance (see Ford & Harrison Legal Alert dated 9/8/2010) the IRS indicated that health FSA and HRA debit cards could not be used to purchase over-the-counter medicines or drugs after January 15, 2011, except with respect to "90% pharmacies."

Notice 2011-5 modifies this previously issued guidance. Under Notice 2011-5, the health FSA and HRA debit card purchases of over-the-counter medicines or drugs after January 15, 2011 will be considered fully substantiated at the time and point of sale if the conditions set forth below are met.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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