Latest IIAS News for Cardholders
Starting 7/1/2009 – All pharmacies and drug stores must be certified using a Inventory Information Approval System (IIAS) or 90% certified for your Spending Account Card to be used.
Beginning July 1, 2009, IRS regulations specify that FSA/HRA debit cards may not be used at stores with the Drug Stores and Pharmacies merchant category code (MCC) unless the merchant has an Inventory Information Approval System (IIAS), or 90 percent (90%) or more of the store’s gross receipts during the prior taxable year consisted of items which qualify as expenses for medical care un Section 213 d of the IRS Code (including prescriptions and certain non-prescription medications).
Since January 1, 2008, the Internal Revenue Service (IRS) identified which merchants would be qualified to accept healthcare cards (such as the Spending Account Card). The Spending Account Card will only be accepted at:
- Healthcare-related merchants, such as physician and dentist offices, vision care providers and hospitals;
- Non-healthcare related merchants, such as grocery stores, discount stores, wholesale clubs, web-based merchants (ie. drugstore.com) that use an IRS-approved inventory information approval system;
- Drug stores and retail pharmacies that have implemented an IRS-approved inventory information approval system
Frequently Asked Questions
Q. What is an “Inventory Information Approval System” or IIAS as specified by the IRS?
A. Because of this new regulation, merchants who accept the Spending Account Card (or any healthcare debit card) must implement an Inventory Information Approval System (IIAS). An IIAS is part of the retailer’s Point of Sale system that identifies eligible healthcare FSA/HRA purchases by comparing the purchased items’ inventory control information (e.g. UPC or SKU number) against a pre-established list of eligible items. The list is restricted to “eligible expenses” as described in Section 213(d) of the Internal Revenue Code (including eligible non-prescription items). The purchase amount of the eligible items are totaled and sent to ADP, which approves the payment provided there are adequate funds in your Spending Account.
Q. When will merchants be ready to meet the IRS IIAS & 90 percent (90%) requirements?
A. There are more than 5,000 merchants already complying with the IIAS regulations in which many of them have been offering the point of sale solution since January 1, 2008. Other merchants continue to change throughout the year.
Q. What types of merchants are expected to support an IIAS have been 90 percent (90%) Certified?
A. The IRS required retail locations that sell qualified items to have an IIAS in place by January 1, 2008 for the purpose of accessing your ADP Spending Account funds. All merchants within the following categories had an approval system in place by January 1, 2008:
All merchants within the following categories must have an IIAS or 90 percent (90%) certified approval system in place by 7/1/2009:
- Warehouse Clubs
- Discount Stores
- Convenience Stores
You can find the recent list of certified IIAS merchants by going to www.sig-is.org and navigating to the IIAS Rule Merchants List.
- Drug Stores
- Druggists/Druggists Sundries
- Online Pharmacies
Q. After July 1, 2009, which merchants will restrict the use of my Spending Account Card?
A. The card will continue to be restricted to use of purchasing eligible healthcare items at merchants who have implemented an IRS-approved information inventory approval system (IIAS) or who have certified 90 percent (90%) or more of the store’s gross receipts during the prior taxable year consisted of items which qualify as expenses for medical care un Section 213 d of the IRS Code (including prescriptions and certain non-prescription medications).
You can find the recent list of certified merchants by going to www.sig-is.org and navigating to the 90% Rule Merchants List.
Q. How does my Spending Account Card work at merchants who have implemented an IIAS?
A. Eliminates Need for Receipts at Participating Merchants! When you swipe your card at one of the above approved merchants, the IIAS will “approve” the items identified as healthcare related items at the point of sale. If you include non-eligible items (e.g., groceries) with your purchase, you will be asked to use another form of payment for those items. These purchases are automatically validated (substantiated) at the point-of-sale, so we will not be requesting receipt information from you. It is still important that you save all receipts!
Q. How does my Spending Account Card work at merchants who are 90 percent (90%) certified?
A. When you swipe your card at one of the above certified merchants, the claim will “approve” the items identified as healthcare related items at the point of sale. These purchases are not automatically validated (substantiated) at the point-of-sale, so we will attempt to auto-substantiate your claims using all approved IRS substantiation methods. If we are unable to automatically validate your claims, you will be required to provide your receipt and/or Explanation of Benefits (EOB’s) to prove it is an eligible expense under IRS regulations. It is important that you save all receipts!
Q. What if my card is no longer accepted at my drug store or pharmacy after July 1, 2009?
A. If your card is no longer being accepted based on the IRS regulations, you can still receive reimbursement for eligible healthcare items. You will need to use another form of payment and submit the receipts along with a claim form to ADP.
Q. Will I still need to save my receipts?
A. Yes, it is a good idea to save these receipts in case of an audit. You may still be required to send in receipts for the amount charged to your Spending Account Card if the amount is unable to be automatically substantiated by all the approved IRS methods.
For a complete list of retailers supporting IIAS, please refer to the document, IIAS Participating Merchants. The list contains up to date information on the merchants who currently support or will be supporting the approval system. When you use your ADP Spending Account Card for an eligible healthcare expense at one of the merchant locations listed, your purchase will be automatically authorized. This means your card will only be accepted for purchasing eligible items. If you are purchasing ineligible items, you will be asked for another form of payment.
Although many merchants will be able to support the approval system starting January 1, 2008, there are others that will not. Please be aware that you may not be able to use your Spending Account Card at some merchants that previously accepted the card. Grocery and Discount stores not listed in the IIAS Participating Merchants document will not accept the card as a form of payment.
If you would like to learn more on how the spending account card works, click here.