NU Online News Service, Nov. 25, 2003, 5:31 p.m. EST – Congress has given an early Christmas gift to the companies that are selling debit card-based systems for administering flexible savings accounts and health reimbursement arrangements.[@@]
One part of H.R. 1, which is known as the Medicare Prescription Drug, Improvement and Modernization Act of 2003, relieves employers that offer FSAs and HRAs from the obligation to send annual tax forms to individuals and organizations that do business with plan members.
The section will become Section 1203 of the federal Social Security Act.
Earlier this year, the Internal Revenue Service ruled that an FSA or HRA sponsor ought to send 1099 forms to providers of “medical and health care services” that get more than $600 in payments from the employer’s FSA or HRA plan.
The ruling states that “payments made to medical service providers through the use of debit, credit and stored value cards are reportable by the employer on Form 1099-MISC under section 6041,” according to a joint House-Senate explanatory statement about H.R. 1 that is posted on the House Ways and Means Committee Web site.
The May IRS ruling exempted pharmacies and nonprofit hospitals from the 1099 reporting requirement, according to Cobra Compliance Inc., Centennial, Colo.
Now, Section 1203, which appears on page 678 of a version of the H.R. 1 conference report posted on the Ways and Means Web site, says the Form 1099 reporting requirement “does not apply to certain health arrangements.”