Harry Gross: A headache for medical-savings accounts

Dear Harry: My employer has had a wonderful program of a Flexible Spending Account (FSA) for employees' medical expenses. I have allocated $2,000 a year to cover most of my uninsured costs. I have never left any of the money in the account at the end of the year, so none of it was forfeited. This year is a different story. I'm fearful that I may run short because of what I have just heard. Is it true that I may no longer be reimbursed for over-the-counter medicines that I take? If so, that will make it so tight that I may have to leave some of that FSA on the table at the end of this year.

What Harry says: What you have heard is true not only for FSAs, but also for Medical Savings Accounts, Health Reimbursement Arrangements or Archer Medical Savings Accounts. Starting this year, only drugs that are professionally prescribed can be paid for by withdrawals from these plans. For most of these, you should be able to get a prescription. The best example is probably the prescription of aspirin for cardiovascular health. A good relationship with your doctor can be a huge help in these situations. Any distributions that are used to pay for anything other than a qualified medical expense must be added to income on your tax return unless they are repaid to the FSA. And a new hit. There is a penalty tax of 20 percent of these distributions required to be included in income instead of the old 10 percent.

Write Harry Gross c/o the Daily News, 400 N. Broad St., Philadelphia, PA 19130. Harry urges all his readers to give blood - contact the American Red Cross at 800-Red Cross.