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Healthcare Flexible Spending Account Documents

Should be Amended by December 31


Thomas M. White
ARNSTEIN & LEHR LLP
120 SO U T H RI V E RSI D E P L A ZA | SU ITE 1200
CHI CA G O , I L 60606
P 312.876.71 84 | F 312.876.0 288
tmwhite@arnstein.com

Many 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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