In Revenue Ruling 2003-102, the IRS has for the first time indicated that employee expenses for over-the-counter medicines and drugs may be reimbursed by employers on a non-taxable basis.

What does this mean if you have a cafeteria plan in place?

• Those who want to give their employees the added coverage should ensure that their plans are broad enough to provide for this expanded reimbursement opportunity.
• Those who do not want the added burden and expense of this expanded reimbursement should ensure that their plan language restricts reimbursement to prescription drugs only.