Ask the lawyer: confused by complex health-care legal questions? 'Ask the lawyer' has the answers.

Q. Can employees submit for reimbursement the cost of prescription drugs purchased in Canada?

A. No. According to IRS information letter, INFO 2005-011, "medicine and drugs" must be procured legally. The FDA announced that it is illegal to import drugs from other countries. Therefore, the cost of illegally imported drugs may not be reimbursed on a tax-free basis, and a deduction is not allowable on an individual's tax return.

Q. If I file for bankruptcy, is my traditional IRA included as part of my bankruptcy estate?

A. No. The U.S. Supreme Court recently determined that IRAs can qualify for bankruptcy protection. Bankruptcy filings made after Oct. 16, 2005, will be governed by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The new act exempts IRAs (other than SEPs and simple IRAs) and Roth IRAs from a debtor's bankruptcy estate to the extent the aggregate value of contributions, excluding amounts from rollover contributions, do not exceed $1 million.

Q. I just heard that the IRS changed a cafeteria plan rule that affects medical reimbursement and dependent care expenses. What has changed?

A. In May, the IRS issued Notice 2005-42 that relaxes the "use it or lose it" rule. An employer can now add a "grace period" to its cafeteria plans of up to 2 1/2 months immediately following the end of the plan year. This means that employees have up to 14 1/2 months to use up their plan account balances. Cafeteria plans must be amended before the last day of the plan year (Dec. 31 for calendar year plans) to add this optional change.

Q. Help! What does my company need to do to comply with the new Social Security Number Privacy Act (SSNPA)?

A. The new SSNPA prohibits:

* Displaying in public more than four sequential digits of any employee's, student's or other individual's social security number [SSN].

* Using the SSN as an individual account number (certain exceptions apply).

* Printing the SSN on any ID badge, membership card, permit or license.

* Requiring an individual to use or transmit more than four sequential digits of the SSN to access a Website, computer system or network unless the connection is secure and the transmission encrypted or protected by a password, unique personal identification number or authentication device.

* Requiring use or transmission of more than four digits of the SSN over the Internet, computer system or network, unless the connection is secure or the transmission is encrypted; or

* Using all or more than four sequential digits of the social security number in or on any document or information mailed or otherwise sent to an individual if it's visible on or, without manipulation, from outside of the envelope packaging.

* Effective Jan. 1, 2006, including all or more than four sequential digits of the social security number in a document mailed to a person, unless otherwise permitted by the SSNPA.

The SSNPA provisions do not apply to the use of all or more than four digits of a social security number when: that use is authorized or required by state or federal statute, rule or regulation; it is within a document regarding establishing, confirming service, amending or terminating a health insurance benefit.

All entities subject to the SSNPA must create a privacy policy by Jan. 1, 2006. The policy should be published as part of your employee handbook or similar document.

By Sherry A. Stein & Melissa J. Jackson

Foster, Swift, Collins & Smith P.C.

This communication is for informational purposes only. All readers should contact legal counsel for more information about health-care and employment law decisions.

Stein and Jackson are shareholders with the law firm of Foster, Swift, Collins & Smith. Stein practices in the area of Employee Benefits. A former Human Resources manager, Jackson practices primarily in labor and employment law. To contact either, visit the firm Website at www.fosterswift.com.