OVER-THE-COUNTER DRUGS CAN NOW BE REIMBURSED BY MedFSAs! In the biggest news for MedFSAs in years, the IRS has just announced that over-the-counter drugs can be reimbursed by MedFSAs (and HRAs). Departing from its prior position. the IRS now states that "reimbursements by an employer of amounts paid by an employee for medicines and drugs purchased by the employee without a physician's prescription are excludable from gross income" under code section 105(b). The Ruling concludes that MedFSAs was authorized to reimburse an employee for purchases of an antacid, allergy medicine, a pain reliever and cold medicine from a pharmacy, none of which were purchased with a physician's prescription. Obesity is now considered as a medical condition and, as such, cost of treatment is reimbursable. Health Club dues may qualify as a medical expense if prescribed or recommended by professional medical persons. [Rev.Rul 2003-102 (September3, 2003) A Medical Flexible Spending Account (MedFSA) is an inexpensive employee benefit which allows the employee to set aside NON-TAXED earnings to pay for eligible out of pocket health care expenses, again TAX FREE. The employee chooses an annual amount to put into their MedFSA account before taxes are withheld. These funds will be deducted equally from each paycheck. Each time a non-insured qualified medical expense is incurred, the employee submits a Reimbursement Request Voucher along with copies of the charges. On the Friday after the request is posted, the medical reimbursement is deposited directly into the employee's designated bank account. IT'S JUST THAT SIMPLE Example: If an employee in the 28% tax bracket chooses to use $1,200 through their MedFSA, not only will they save 28% federal income tax, but also save the 7.65% FICA and most state income tax. Use of this account will result in the employee saving $428 plus any states' income tax. An employee in the lower 15% tax bracket will save $272 plus most states' income tax. If the employee chooses not to use the MedFSA account, the savings they would have had goes to taxes. If a participant does not have a bank account, Beneflex will provide an ATM/Debit Card free to receive reimbursement of funds. Employees benefit by: budgeting out of pocket medical costs over the entire year paying medical costs with what otherwise would be tax dollars receiving prompt reimbursement directly to their bank account paying for non-insured items, deductibles and co-pays with earnings that are not taxed