444 / How does the ACA affect health FSAs?
Under IRC Section 106(f), expenses incurred for medicines or drugs may be paid or reimbursed by an employer-provided plan, including a health FSA or HRA, only if the medicine or drug:
(1) requires a prescription;(2) is available without a prescription, that is, is an over-the-counter medicine or drug, (before 2020, the individual was required to obtain a prescription); or
(3) is insulin.
These rules generally apply to expenses incurred for taxable years beginning on or after January 1, 2011. Congress removed the prescription requirement for over-the-counter drugs in 2020.
Additionally, for plan years beginning in 2013 and thereafter, contributions to flexible savings accounts are limited to $3,300 in 2025 ($3,200 in 2024, $3,050 in 2023, $2,850 in 2022, $2,750 for 2020-2021 and $2,700 for 2019), as indexed for inflation in subsequent years.1 Flexible spending accounts are those accounts, typically in cafeteria plans, that may be used to reimburse medical or dependent care expenses.