Hello,
It's Open Enrollment time at work and we are being offered the HDHP/HSA option for the first time. I took a CCH class to learn more about HSAs so I have a better idea of the decision ahead of me-- and so I can better advise my clients come tax season.
According to the CCH class (Health Savings Accounts, Second Edition), "Over the Counter Medications are not allowed to be counted as Qualifying Costs covered by an HSA." It continues in that "this is a primary reason for employers to offer, and employees to participate in FSAs even if HSA is available."
The materials my employer has provided indicate that OTC is covered by HSA, so participants can only get a "limited use FSA" which will be used for dental and vision-- as all other costs are covered by HSA.
I brought this discrepancy to their attention and of course they pulled out the IRS pubs, 969 (HSAs) and 502 (Medical & Dental Expenses).
Specifically, "On pages 6 and 7 of Publication 969, the section relating to qualified
> medical expenses specifies that qualified expenses include "amounts
> paid for doctors' fees, prescription and non-prescription medicines,".
> It refers you to Publication 502 for further explanation of qualified
> medical expenses.
>
> On page 11 of Publication 502, under the Medicines section, please see
> the note that states "This rule applies only to the deduction for
> medical expenses. It does not limit reimbursements of medical expenses
> by employer-sponsored health plans that reimburse the cost of both
> prescription and nonprescription medicines."
I was looking for something more than the CCH class to respond back with so naturally I looked in the TaxBook. The TaxBook also indicates that OTC is covered by the HSA.
Does anyone have any information that can clear this up?
thanks,
Tax1040
It's Open Enrollment time at work and we are being offered the HDHP/HSA option for the first time. I took a CCH class to learn more about HSAs so I have a better idea of the decision ahead of me-- and so I can better advise my clients come tax season.
According to the CCH class (Health Savings Accounts, Second Edition), "Over the Counter Medications are not allowed to be counted as Qualifying Costs covered by an HSA." It continues in that "this is a primary reason for employers to offer, and employees to participate in FSAs even if HSA is available."
The materials my employer has provided indicate that OTC is covered by HSA, so participants can only get a "limited use FSA" which will be used for dental and vision-- as all other costs are covered by HSA.
I brought this discrepancy to their attention and of course they pulled out the IRS pubs, 969 (HSAs) and 502 (Medical & Dental Expenses).
Specifically, "On pages 6 and 7 of Publication 969, the section relating to qualified
> medical expenses specifies that qualified expenses include "amounts
> paid for doctors' fees, prescription and non-prescription medicines,".
> It refers you to Publication 502 for further explanation of qualified
> medical expenses.
>
> On page 11 of Publication 502, under the Medicines section, please see
> the note that states "This rule applies only to the deduction for
> medical expenses. It does not limit reimbursements of medical expenses
> by employer-sponsored health plans that reimburse the cost of both
> prescription and nonprescription medicines."
I was looking for something more than the CCH class to respond back with so naturally I looked in the TaxBook. The TaxBook also indicates that OTC is covered by the HSA.
Does anyone have any information that can clear this up?
thanks,
Tax1040
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