Healthcare Flexible Spending Account Documents Should be Amended by December 31

flexible spending benefits imageMany employers have established health care expense (or “flex spending”) accounts under cafeteria plans to which employees make salary deferrals and are then reimbursed for medical expenses. Under current law, reimbursable medical expenses include, for example, prescription drugs and over-the-counter medications and other treatments. Thus, many individuals obtain reimbursement for contact lens solution and certain dietary supplements. The recent health care reform law restricts reimbursement for medication, effective January 1, 2011, to insulin or drugs prescribed by physicians.

Due to this change in the law, sponsors of these plans should review their formal documents, plan descriptions and claims forms in order to comply with the new reimbursement limitations. In addition, enrollment documents and the content of oral communications should be reviewed as well. Plan amendments covering the new limitations should be adopted by December 31, 2010 and made effective on January 1, 2011.

Employers should also go one step further. It is common for plan enrollment meetings to
occur in the fall of the year before January 1 open enrollment. Employees should be informed of these changes in the law before they make their annual flex spending elections, to assure they do not contribute too much – because any excess contribution must be forfeited at year end. Time is short, particularly in light of any scheduled fall enrollment meetings. Plan sponsors should contact their attorneys and benefit advisors now to assure that the appropriate amendments and other supporting documents are in place before December 31, 2010.

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