2011 Health Savings Account (HSA) changes

Health care reform changes to HSAs which go into effect January 1, 2011

  • Over-the-counter (OTC) medicines and drugs will no longer be eligible for tax-free reimbursement from an HSA without a doctor’s prescription. This includes pain relievers, sleep aides, and cough medicines.
  • Certain OTC purchases, such as insulin, bandages, and medical devices, continue to be eligible for tax-free purchase from an HSA without a prescription. Accountholders should always keep their receipts and save doctor’s prescriptions for OTC purchases with their tax records.
  • The tax penalty for non-qualified distributions from an HSA will increase from 10 percent to 20 percent (for accountholders under age 65 and not disabled).
  • Family insurance coverage may be extended to children up to age 26 but HSA distributions can only be made for qualified expenses incurred by tax dependents. If a tax dependent is listed on an accountholder’s federal income tax, typically their qualified expenses can be paid from the HSA.

2011 contribution limits

The Internal Revenue Service (IRS) 2011 annual contribution limits for HSAs are the same as the 2010 annual contribution limits. The 2011 minimum deductible and maximum out-of-pocket limits for HSA-compatible health plans also remain unchanged.

  Tax year 2011
HSA annual contribution limits Single – $3,050
Family – $6,150
HSA catch-up contributions $1,000 per individual age 55 or older
Minimum deductible Single – $1,200
Family – $2,400
Maximum out-of-pocket expenses Single – $5,950
Family – $11,900

Health Savings Accounts – HSA Changes for 2011

No Change In Contribution Amounts from 2010   

What Is changing effective January 1, 2011?

  • Over-the-counter medicines and drugs will no longer be considered a qualified medical expense.
  • The penalty for using HSA funds for other than a qualified medical expense increases from 10% to 20%.

HSA Maximum Amounts

  2007 2008 2009 2010 2011
Minimum Deductible Amount
-Individual $1,100 $1,100 $1,150 $1,200 $1,200
-Family $2,200 $2,200 $2,300 $2,400 $2,400
Maximum Out-Of-Pocket Amount
-Individual $5,500 $5,600 $5,800 $5,950 $5,950
-Family $11,000 $11,200 $11,600 $11,900 $11,900
HSA Statutory Contribution Maximum
-Individual $2,850 $2,900 $3,000 $3,050 $3,050
-Family $5,650 $5,800 $5,950 $6,150 $6,150
Catch-Up Contributions (For individuals 55 or older until enrolled in Medicare)  $800  $900  $1,000  $1,000  $1,000

Over the Counter Drugs May no Longer be Covered Under an FSA

As of January 1, 2011 over the counter medicines and drugs will no longer be covered under a Flexible Spending Account (FSA) unless a letter of medical necessity is obtained from a physician.  The exception to this is insulin, or health related supplies.  Prescription medications will continue to be eligible, although some items may require additional substantiation regarding necessity.

According to a study conducted by a large health debit card provider, losing the tax-deductible status for OTC medicines will affect only a small percentage of employee medical FSA reimbursements.  It is suggested that participants continue to make their elections as conservatively as possible, and not drastically reduce their contributions

Flexible Spending Accounts (FSA) Eligible Expenses to Change in 2011

Flexible Spending Accounts (FSA) Eligible Expenses to Change in 2011

Based on recent healthcare legislation, Congress had determined that over the counter prescription (OTC) drugs will no longer be an eligible expense under an FSA (Flexible Spending Account) plan.    This change will become effective on January 1, 2011.

 Insulin and all health related supplies (such as syringes) will continue to be an eligible expense.  Any OTC for which you have a physician’s prescription or letter of medical necessity will be covered as an exception.

According to a recent study, this change in law regarding FSA eligible expenses will not greatly impact the reimbursements for and tax advantages of FSA enrollment, as there will most likely be other expenses that could be used to fill any void. 

If you are enrolled in an  FSA or Health Savings Account, Health Reimbursment Account , please contact your health insurance broker or employee benefit advisor for information, or contact our office at (888) 474-6627.