News & Updates

Changes to Personal Spending Accounts Beginning January 1, 2011
With the passage of national health care reform, important changes have been made to Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), and Health Reimbursement Arrangements (HRAs).

The law impacts a number of areas in all three types of accounts, including reimbursements and withdrawals, and reimbursements for over-the-counter (OTC) medications and products. This article outlines some of those changes.

Effective January 1, 2011, penalties for distributions from HSAs and medical savings accounts that are not used for qualified medical expenses will increase to 20 percent of the disbursed amount. Non-qualified distributions also continue to be subject to income tax.
Effective January 1, 2011, distributions from FSAs, HSAs, and HRAs for OTC medications (other than insulin) will no longer be permitted, unless the purchase is pursuant to a prescription.
Effective January 1, 2012, employers must include the value of salary deduction contributions to FSAs and contributions to HSAs and HRAs on employees' W-2s. Reporting by employers is optional in 2011.
Effective January 1, 2013, salary reductions by an employee for a taxable year for the purposes of coverage under an FSA under a cafeteria plan are limited to $2,500. In addition, for taxable years beginning after December 31, 2013, the dollar amount shall be increased by a cost-of-living adjustment.

For more information about these changes, please contact your FSA/HSA/HRA account administrator.

HSA Limits for 2011
The Internal Revenue Service has set the contribution and other limits for Health Savings Accounts for 2011 at the same level as 2010.

2011 Limits for HSAs and High-Deductible Health Plans
High-deductible health plan minimum deductible amounts	Individual: $1,200 / Family: $2,400
High-deductible health plan maximum out-of-pocket amounts	Individual: $5,950 / Family: $11,900
HSA statutory contribution amount	Individual: $3,050 / Family: $6,150
HSA catch-up contributions (age 55 or older)	$1,000

Additional Resources
To learn more, please see the following resources:

IRS Guidance Explaining 2011 Changes to FSAs—Provides guidance on changes to FSAs with regard to payment for OTC medicines and drugs.
IRS Notice on OTC Drugs—Provides guidance on the new definition of medical expenses as it relates to OTC medicines and explains the rules for reimbursement of OTC medications through FSAs, HRAs, HSAs, and Archer MSAs.
FAQs for Reimbursement Rules for Over-the-Counter Medicines—Offers answers to frequently asked questions about the new rules, qualifying medical expenses, and claims submission processes.

Account Administrator Information

Bank of America
Administers HSAs, HRAs, and FSAs. A Bank of America account provides competitive monthly fees with no setup charges, robust online portals for employers and members, comprehensive support for questions about account funding and investment options, and more.

Benefit Concepts
Administers HRAs and FSAs. Members with an HRA and/or FSA through Benefit Concepts have access to online tools that allow them to view and submit claims, manage PSA account balances, access forms, documents, and other tools.

Wells Fargo Health Benefit Services
Administers HSAs. Wells Fargo, a highly recognized financial services company offers a competitive rate, employer and employee portals to manage HSA account activity, and a strong service and account management support team.

This information is provided for informational purposes only and does not constitute legal advice. Please consult your legal counsel regarding your specific situation.

Please note that this content is only intended to describe national health care reform requirements under the Patient Protection and Affordable Care Act (PPACA). It does not address Massachusetts law requirements or the potential impact of Massachusetts law on federal PPACA requirements.

For purposes of PPACA implementation, Blue Cross Blue Shield of Massachusetts assumes the plan year is the policy year, unless an account notifies us otherwise.