August, 2009
New IRS Regulations
In the recent past participants had three methods to use their health FSA.
Method # 1: Use an IIAS merchant and have the claim auto-substantiated. (IIAS
merchants are those merchants who participate in an auto-substantiation
program)
Method #2 : Use the care at non IIAS participating health vendor merchants and submit a
receipt following the transaction.
Method #3: Submit a manual claim.
As of 7/1/09, the IRS added additional restrictions to the use of the debit card. The new methods for using health FSA accounts are now as follows:
Method #1: Use an IIAS merchant and have the claim auto-substantiated. (IIAS merchants
are those merchants who participate in an auto-substantiation program.)
Method #2: Submit a manual claim.
OPTIONAL
Method #3: Use of the card at vendors which have certified that 90% of their store's gross
receipts consisted of items which qualify as expenses for medical care under
§213 (d). HOWEVER, EVERY PURCHASE MADE AT THESE VENDORS WILL REQUIRE
SUBMISSION OF A RECEIPT
.
If a provider is not on either the IIAS Member Merchant List or the self-certified 90% Rule Merchant List a manual claim submission will be required.
Lists of qualifying Merchants for both may also be found at the following links:
IMPORTANT NOTICE FOR USERS OF FLEX/HRA BENEFITS CARDS
As of December 31, 2007, Flex/HRA benefit cards cannot be used at grocery stores and retail centers UNLESS the merchant has implemented the IIAS (Inventory Information Approval System).
The IRS requires merchants that sell qualified medical expense good and services (but do not have a health care merchant code) to have an IIAS in place by January 1, 2008 for purposes of accessing FSA/HRA funds. This includes any merchant with a merchant code of: Grocery Stores, Discount Stores, Warehouse Clubs, Convenience Stores, and Online Pharmacies.
If a retailer’s merchant code is not healthcare related, the IRS requires plan administrators to only approve FSA/HRA card transactions when these merchants support an IIAS.
The good news is, less receipts will be requested! For example, you take 5 eligible items and 1 ineligible item to the check out clerk in Target. You will be allowed to pay for the 5 eligible items using your Flex Benefits Card and you’ll be asked how you would like to pay for the ineligible item. Once you’ve paid for the 5 eligible items with your Benefits Card, this is considered auto substantiation and you will not be asked to submit a receipt.
Pharmacies do not have to comply until December 31, 2008. You will continue to be asked for receipts in the pharmacy until your pharmacy complies, which could be earlier than December 31, 2008.
The list of retailers that have agreed to comply changes frequently. If you would like to have the most current list, you can find it at www.sigis.com. Look under Publications and you’ll see a link to the SIGIS Merchant List. Wal-Mart Stores, Harris Teeter, Inc. Kerr Drug, Target Corporation, Sam’s Club, Walgreens, Kroger, and CVS are already on the list agreeing to comply. Participants may already be shopping at these stores and seeing the change.
