Debit Card IIAS Requirements for January 1, 2008
What Is the Issue?
In 2006, the IRS issued Notice 2006-69 which provided guidance on the use of debit cards associated with Flexible Spending Account (FSA) plans, such as the FlexSystem Claim Card.
Central to this guidance is the new Inventory Information Approval System (IIAS), a point-of-sale system that electronically identifies eligible healthcare FSA purchases.
The IIAS system works by comparing the inventory control information (e.g. UPC Code or SKU number) of the item(s) being purchased against a pre-established list of eligible medical expenses. The merchant’s system identifies the eligible expense - including purchases of over-the-counter items - and approves payment.
To give merchants and FSA participants time to adjust to these new regulations a “transitional relief” period was instituted. Merchants affected by these regulations are to use this period to upgrade their systems as needed to meet the new standards.
Continued use of the Claim Card is permitted at non-healthcare merchants such as supermarkets, grocery stores, discount stores, and wholesale clubs through December 31, 2007, which is the end of the transitional period.
IMPORTANT: The January 1, 2008, date only affects card purchases at non-healthcare merchants as described above. Pharmacies have until 2009 to establish an IIAS system, and purchases for services rendered at physician's offices, dental and vision clinics are not subject to these requirements at all.
How Might This Affect FlexSystem Participants?
TASC’s Claim Card is already set up to accommodate IIAS information. This information identifies a merchant with a compliant IIAS system and approves the transaction accordingly (regardless of the MCC). Purchases from vendors with an IIAS in place seldom require additional substantiation or supporting documentation. However, TASC internal quality audits may request substantiation. Therefore, Participants should keep all FSA eligible receipts, no matter how the expenses were paid (Claim Card or other method).
Whether made at a location with or without an IIAS system, all eligible purchases paid with the FlexSystem Claim Card are deducted from the Participant’s FlexSystem account. Items that are not FSA eligible will require a separate form of payment, and are the sole responsibility of the Participant. Further, at times an eligible expense may be declined at point of purchase, meaning the Participant must pay for the expense another way (not using the Claim Card) and subsequently request reimbursement from FlexSystem using the on-line system, fax, or mail.
This IIAS system is already in place in many locations, most notably at Walgreens, Target, and other large chain stores. The list of IIAS-certified merchants increases daily, suggesting the IIAS will be standard in the very near future.
As noted above, pharmacies have until 2009 to establish an IIAS system, although it is expected that many will be ready by or during 2008.
Clearly, the IIAS increases auto-substantiation, decreases transaction denials and, over time, increases participation in and satisfaction with FSA plans. TASC will continue to work with non-healthcare merchants to develop standard IIAS solutions. We strive to serve our customers with the highest levels of speed, access and accuracy. More information will be provided as our development in this area progresses.