New Legislation and HSAs

The Affordable Care Act (ACA) was passed in March 2010.

The IRS's role is to administer the various tax provisions included in the new law. The Department of Health and Human Services (HHS) has the lead in all health insurance and health care policy provisions of the new legislation.

The Affordable Care Act made the following changes to HSAs:

• Beginning in 2011, taxpayers must have a prescription for over-the-counter medicine in order in order to pay for over-the-counter medicine with a distribution from a health savings account (HSA) and have that distribution be tax-free. This change does not apply to insulin.
• The additional tax increased. For HSA purposes, the additional tax on distributions not used for qualified medical expenses is increased to 20%. This applies to distributions after 2010.

These changes are covered in detail in the course.