This is REALLY important to know for anyone who has a HSA (Health Savings Account), FSA (Flexible Spending Account) or HRA (Health Reimbursement Account). Most of us have one.
In 2011, these plans will no longer be able to reimburse over-the-counter medications on a tax-free basis. The only exception: doctor-prescribed over-the-counter medications, such as for Clariton and Prilosec, can continue to be reimbursed tax free.
What to do now in 2010:
- If you have money to use up before the end of the year and generally buy your Tylenol at this time, remember to do it!
- Adjust your elective withdrawals if you use these accounts for your over-the-counter medical expenses starting next year
- If you are an employer, revise your plan renewal information and communicate this important change clearly to your staff
Don't "accidentally" turn in reimbursements after 2010 for OTC medications because, guess what? Starting next year, the penalty on non-medical reimbursements from HSAs to those who are under age 65 doubles to 20 percent; currently it's 10 percent.
I encourage you to share this information NOW with friends and family so they can prepare ahead of time - it can mean hundreds of dollars in savings for them.
This doesn't just effect Minnesota employees and employers - this is a significant federal tax change.
More information about Federal Tax Law Changes that could affect you in 2011 (Note: There are A LOT)
More information on Minnesota Law Changes that could affect you in 2011: