Health Care Spending Account Changes
As always PMG Agency wants to keep you informed and updated with current information regarding the health care industry and health care reform. We want to make sure you are aware of these changes that may impact your individual or group coverage.
The health care reform law changes rules for the following spending accounts:
- Health care flexible spending account (FSA)
- Health reimbursement arrangement (HRA)
- Health savings account (HSA)
- Archer medical savings account (MSA)
The IRS has determined that the change in inflation was not significant enough to result in adjustments to the 2011 limits on Health Savings Account (HSA) contributions. The limits for 2011 are listed below for your reference.
2011 Maximum HSA Contributions
- Individual contribution: $3,050
- Family contribution: $6,150
- Catch-up contribution (over age 55 and not enrolled in Medicare) $1,000
Additionally, for a health plan to qualify as a “high deductible health plan” for the 2011 calendar year, the health plan will have, at minimum, an annual deductible of $1,200 for single coverage and $2,400 for family coverage. The annual out-of-pocket maximum is no more than $5,950 for single coverage and $11,900 for family coverage.
Increased penalty for nonqualified HSA and MSA Distributions
The tax penalty on HSA and MSA distributions that are not used for qualified medical expenses is increasing from 10% to 20% of the disbursed amount. This change is effective for disbursements made during tax years starting on or after January 1, 2011.
Prescriptions required for over-the-counter drugs (OTCs)
Beginning January 1, 2011, members can use health care spending account funds for a medicine or a drug only if the medicine or drug is prescribed by a doctor (or another health care professional who is legally authorized to issue a prescription) in the state in which the OTC drug is purchased. The only exception is for insulin. The new standard applies to FSAs, HRAs, HSAs and MSAs.
The prescription requirement applies to OTC medicines and drugs purchased on or after January 1, 2011. This effective date applies to all plans, regardless of the plan year dates. This means that the rules will change in the middle of the plan year for all plans that are not calendar year plans (that is, a plan year that begins on January 1 and ends on December 31).
At this point, all other current rules for health care spending accounts continue to apply. To see lists of qualified expenses, refer to IRS Publication 502: http://www.irs.gov/pub/irs-pdf/p502.pdf Note: These lists are not all-inclusive and are subject to change by the IRS. Consult your tax adviser if in doubt about a particular expense.
As always, if you have any questions regarding any of these changes please feel free to call the PMG office at 260-755-3585. We want our customers to be informed of changes that may impact their health care coverage. Thank you for your business, we appreciate you as our customer!
