Individuals, thanks to new rules under the Cares Act, can now use their health savings accounts (HSAs) or health care flexible savings accounts (FSAs) to pay for over-the-counter (OTC) drugs as well as menstrual care products, according to David Speier, a managing director at Willis Towers Watson.
The rule change, which took effect, Jan. 1, 2020, also gives individuals more time to contribute to their HSA for 2019, according to Spier.
Under the new rules, Spier says OTC drugs such as pain relievers and cold medicine can be paid for with funds in an HSA or FSA without a written prescription from a doctor. What’s more, menstrual care products can also be paid for with funds in these accounts.
The rule change regarding OTC drugs requires, however, that an employer adopt the provision for their FSAs for employees to take advantage of it.
The rule change also allows individuals who have not reached the annual contribution limit for their HSA for 2019 to make contributions up until July 15, 2020. The change includes HSAs funded by employers.
Spier says these much-needed changes will be welcomed by millions of Americans feeling the financial stress of COVID-19 related economic conditions. Many individuals, he says, have emergency savings in their HSAs, and now have the freedom to spend those savings on additional items if needed. The extended deadline may also be valuable to individuals who can afford to set aside more dollars for emergencies or long-term savings.
Spier also noted that employees with dependent care FSAs can change or halt their contributions when there is an event that changes their coverage, such as the closure of a workplace facility. Employees would then be able to renew or increase contributions when schools open and daycare center resumes.
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