This change significantly decreases the value of having a FSA (and maybe that’s the intent). First of all, no one goes to their doctor to get prescriptions for OTC medications…because they are OTC meds, hence don’t require prescriptions! Doesn’t that nullify the value of making a drug OTC?

The ability to pay for OTC meds with FSA funds helps safeguard against
the risk inherent with FSAs since they are use-it-or-lose-it. If we do not use all the funds (to which we contribute out of our own pocket), then we lose that money. Each year participants must estimate medical expenses and plan how much money to contribute; however estimates rarely reflect actuals. In years when actual expenses were less than what was allocated to the FSA, participants were able to purchase OTC meds as a method to reduce or eliminate losing unused funds. The IRS rule change now unfairly removes this ability.

The government cannot not have it both ways; FSA programs that are use-it or lose-it and imposing unfair restrictions on how participants may use their own money to pay for legitimate medical expenses.

Interesting that this is going back to the way it was in 1985

“Flexible Spending Accounts were established under the tax code to provide incentives for better health care,” said IRS Commissioner Mark W. Everson. “This action is a sensible expansion and simplification of the program consistent with existing law.”

I guess they changed their minds.