Merchants

  • When can merchants begin completing a 90% registration or certification with the new PIN Standard?

    The new certification and registration process will be available to merchants and Third Party Servicers in the fall of 2012.  A notification will go out to all members once it is available.

  • What does a merchant need to do to be able to accept FSA and HRA cards?

    The IRS requires many merchants selling health care eligible products to support an Inventory Information Approval System (IIAS). The IIAS system is a combination of inventory management and point of sale systems that 1) confirm the health care eligibility of items purchased with an FSA or HRA card, 2) generate a payment transaction that contains the required IIAS information, and 3) includes an information archive system that allows the merchant to respond to a IRS audits as required.

    The components of an IIAS system will typically include:

    • • An Inventory Management system that identifies health care eligible items based on the UPC code and compares them to the item purchased for nationally branded, private label and special promotional packaged branded items. SIGIS provides a list of nationally-branded eligible products to its Members.
    • • A health benefit card identification system capability to identify FSA and HRA cards via BIN ranges of all FSA and HRA cards. The list of required BINS is provided by the merchant's acquirer.
    • • A payment authorization system / POS system that generates an IIAS transaction containing all required IIAS data elements, including an IIAS flag indicating an IIAS system was used, the Health Care Eligible Amount, and if supported, the Rx/Prescription Amount. The Rx/Prescription Amount is a subset of the Health Care Eligible Amount. This system should support partial authorizations to improve the handling and acceptance of FSA and HRA card transactions.
    • • Settlement System that supports the settlement of approved IIAS transactions containing the required IIAS information to a merchant acquirer.
    • • A Transaction Retention capability that supports the storage and retrieval of IIAS transactions to respond to IRS audit requests to confirm the eligibility of items purchased on a FSA or HRA card.

    In addition to supporting a system capable of handling IIAS transactions, a merchant must also join SIGIS by completing a Membership Agreement, complete a Merchant Self-Assessment / Checklist and complete certification with their Acquirer. These materials can be completed online at the SIGIS website at www.sig-is.org.   Alternately, merchants that qualify for 90% rule may enroll in that program.


  • What is the 90% Rule?

    In order for plan administrators to approve FSA/HRA debit card transactions, the merchant must support an inventory information approval system (IIAS), unless the merchant is a drug store or pharmacy that primarily sells Rx/prescriptions and eligible health care products. To qualify, the IRS specifies that 90% of a drug store or pharmacy gross receipts for the prior taxable year are required to consist of items which qualify as eligible medical care under IRS Section 213(d). A drug store or pharmacy must qualify stores on a location-by-location basis. Drug stores or pharmacies that have store locations that meet the 90% Rule criteria may self-register as a 90% Rule merchant through SIGIS. See the 90% Rule FAQ for more information.

  • What are the 90% Rule program requirements?

    Currently, merchants that are registered under the 90% Rule do not need to undertake any technical work. Issuer processors will use the Store ID/Card Acceptor ID field in authorization requests to approve FSA/HRA card transactions at registered stores. Over the longer-term, there may be additional technical requirements that will be published with lead-time for implementation support. Current SIGIS requirements for drug stores and pharmacies who wish to register under the 90% program are:

      • Must become a Member of SIGIS by completing the online Membership Application and paying the appropriate annual membership fee.
      • Completes the SIGIS, online 90% Rule Merchant Registration. During online registration, merchants will be asked to attest that each store registered meets the IRS requirements for the 90% Rule. The following information will also be needed from the merchant’s acquirer in order to successfully complete the form:
          • The acquirer's MasterCard ICA number
          • The acquirer's VISA BIN number
          • The acquirer's Maestro ICA number
          • The acquirer's Visa Interlink ID
          • The acquirer's STAR ABA number
          • The acquirer's NYCE ID number
          • The acquirer's ACCEL ID number
          • The acquirer's PULSE ID number
          • The drug store/pharmacy's Card Acceptor ID (each store has a different Card Acceptor ID) submitted in authorization requests. The Card Acceptor ID is sometimes referred to as the store's "merchant number" or "store location id".
          • The MCC code for your store locations. (Note only locations under 5912 and 5122 are eligible).

    Once the application is submitted, SIGIS will send a confirmation to the merchant registrant and its acquirer via email. It is extremely important that merchants double check the information sent in the email. Any errors may result in transaction declines.


  • If a merchant implements the SIGIS IIAS standard, is there a guaranteed 100% acceptance of the health care debit cards in the marketplace?

    While an IIAS system is required for non-health care merchants to accept FSA and HRA cards under the IRS guidelines, a merchant that implements an IIAS solution is not guaranteed 100% acceptance of all FSA/HRA cards. SIGIS Member card issuers/processor and the majority of their third-party plan administrator clients supporting FSA and HRA cards have enabled SIGIS IIAS processing to authorize and auto-substantiate transactions; however some employer benefit plans may require a level of transaction detail that is not supported with an IIAS solution, thereby, preventing acceptance even at merchants with a fully certified IIAS solution. In addition, normal decline issues can occur for expired cards, insufficient funds, cards not activated and other business reasons.

  • If a merchant can qualify its stores under the 90% Rule, will customers that pay with a FSA/HRA card need to submit sales receipts to their plan administrator?

    Generally, yes. Unlike an IIAS where the merchant substantiates the items being purchased at the point of sale, the 90% Rule indicates that stores that qualify as 90% locations can be viewed as "health care merchants." This means that plan administrators will apply their standard substantiation processes to transactions at these locations - and the customer may be asked to submit a sales receipt to document that the items being purchased were Rx/prescriptions or Eligible Health Care Products. It is possible that in some cases the card issuer processor will be able to match a transaction amount with Pharmacy Benefit Management (PBM) system information, and can determine that the card transaction amount matches the plan's co-pay on prescriptions, for example. In this case, the customer may not be asked to submit a sales receipt. But in the absence of an automated matching program like this, it is likely that customers using a FSA/HRA card will be asked by their plan administrator to submit a sales receipt.

  • Confirm your 90% Rule Self-Registration status

    As a paid Member of SIGIS in good standing, a merchant is able to confirm the status of its SIGIS Registration for the 90% Rule Exemption by going to www.sig-is.org and clicking on 90% Rule Merchant List. If the merchant’s organization is not on the list, the merchant will need to complete the online form to complete registration for the 90% Rule.

    Please note that the list is updated each Monday morning.


  • Confirm your SIGIS IIAS Certification status

    As a paid Member of SIGIS in good standing, a merchant is able to confirm the status of its SIGIS IIAS Certification by going to www.sig-is.org and clicking on IIAS Merchant List.

    A Member’s DBA Names (doing business as name) will be posted on the IIAS Merchant List under the following parameters.

    • If the Membership is listed as "Certified", the merchant has completed the IIAS Certification process

    Please note that the list is published at 5am pst each business day.


  • Is it expected that once a store is registered, that is all that needs to be done?

    Based on the IRS requirements, the merchant will have to re-register each year and attest that the gross sales of a store meet the 90% Rule. There will be an annual registration requirement to meet IRS rules that will be driven by the merchants tax year end date.

    This is a separate process from payment of annual SIGIS membership dues. Both must be completed once a year.


  • Is it required that merchants download the SIGIS product list?

    One of the critical issues in supporting an IIAS solution for employer benefit plans and the third-party plan administrators (TPAs) that support these programs, is assurance that the items being approved through an IIAS solution meet the health care eligibility standards established by the IRS as defined in IRS Code Section 213(d) rules. As described above, SIGIS provides a standardized list of eligible health care-related items. While the IRS does not mandate the use of the SIGIS list, merchants supporting a SIGIS IIAS solution must use the SIGIS Eligible Product List for nationally-branded items. In addition, merchants may also flag private label and local market items as defined in the SIGIS Private Label Eligibility Criteria standards.

    In some point-of-sale solutions, the third-party servicers may assist with loading the monthly updates to the merchants POS system.


  • If a merchant’s stores meet the 90% Rule, is it OK to support an IIAS?

    Yes. Many drug stores/pharmacies already support IIAS capabilities. If merchants support an IIAS, they don't have to worry about annually qualifying the gross sales of each store for the 90% Rule. Additionally consumers will benefit from the auto-substantiation of IIAS transactions.

  • Is a Merchant required to make IIAS changes to accept FSA/HRA cards?

    No. A merchant is not required to implement an IIAS; however, FSA/HRA card issuers will not be able to approve FSA/HRA card transactions when a merchant does not support an IIAS. If you are a merchant and choose not to implement an IIAS, you do not need take additional steps.  Merchants that are pharmacies/drug stores and primarily sell prescriptions and medical items may qualify under the IRS rules as a “90% Rule” merchant.  See the 90% Rule Merchant FAQs for more information.

    For merchants that would like to accept the FSA/HRA cards from their customers, the IRS requires Merchants selling health care eligible products to support an Inventory Information Approval System (IIAS). The IIAS system is a combination of inventory management and point-of-sale systems that can verify the health care eligibility of items purchased with an FSA or HRA debit card, generate a payment transaction that contains the required IIAS information, and includes an information archive system that allows the merchant to respond to an IRS audit(s) as required. As noted above, for Drug Stores / Pharmacies where 90% of the sales on a store-by-store basis qualify as FSA-eligible, a 90% Rule registration program is an alternative option.

    Merchants have the option to not become a Member of SIGIS by establishing their own IIAS standards or 90% Rule Exemption and working with third-party plan administrators individually.

    With the IIAS Certification developed by SIGIS, a non-profit standards organization, a broad range of participating merchants have been able to implement a solution that is recognized industry-wide, which enables acceptance of most FSA/HRA payment cards. Likewise, third-party plan administrators have implemented a common set of procedures that are applied to IIAS transactions at participating merchants.


  • If a merchant primarily sells medical and health care items, but is not a drug store or pharmacy, is 90% Rule Merchant registration permitted?

    No. The IRS is clear that 90% Rule registration is only permitted to drug stores and pharmacies. Merchants that sell medical/health care items or provide medical/health care services use a merchant category code (5912 and 5122) that identifies them as a health care merchant. Of course, merchants with a non-health care merchant category that sell Rx/prescriptions and/or qualified health care products may implement support for an IIAS.

  • As a merchant that has implemented an IIAS system, why are card transactions being declined?

    Merchants who have implemented IIAS systems may continue to see declines on health care benefit cards. Declines for standard business reasons will occur. These reasons include insufficient funds, closed accounts, expired cards, status of accounts, etc. Therefore, if the card transaction declines, it is most likely that the decline is valid. A reference document called MOST FREQUENT VALID REASONS FOR CARD DECLINES can be found on the SIGIS website at www.sig-is.org. This list includes the main reasons why properly formatted IIAS transactions at an IIAS merchant can validly decline against cards that are IIAS-enabled. This is not intended to be an all-inclusive list, but represents the most common reasons that together account for most declines.

  • What if some of a merchant’s stores meet the 90% Rule, but others do not?

    The IRS is clear that only stores whose gross sales are at least 90% from Rx/prescriptions and over-the-counter Eligible Health Care Products can be registered as qualifying for the 90% Rule. If a merchant has other stores that do not meet the 90% Rule, the merchant will need to implement IIAS capabilities in order for FSA/HRA card transactions to be approved. Alternatively, it is possible that an assessment of the costs and benefits may suggest that the merchant would just continue to accept payment cards as they do today without an IIAS. If so, it is likely that FSA/HRA card authorizations would not be approved.

  • What if a merchant doesn’t know who its "acquirer" is?

    A merchant’ s acquirer is the company that actually processes its bankcard transactions. Many merchants have relationships with Independent Sales Organizations or Banks, but the actual processing is done by another company. If a merchant doesn't have a direct relationship with an acquirer, the company with whom a merchant does have a relationship can help you identify its acquirer and should facilitate the gathering of the information needed to complete its registration.

  • What certification is required to support the IIAS standard published by SIGIS?

    Merchants who elect to implement an IIAS using the standard published by SIGIS must first be certified by SIGIS. Certification requires completion of an online IIAS Self Assessment Questionnaire, a technical processing certification, use of the SIGIS Eligible Products List, and arrangements to support transaction data retention/retrieval. A merchant's acquirer will review the questionnaire and submit it to SIGIS for approval. A merchant will not be permitted to claim that it supports IIAS transactions using the published standard until it has been certified to the IIAS Standards developed and approved by SIGIS. If a merchant uses a SIGIS certified merchant service provider (POS Vendor), the merchant may be able to apply for a simpler TPS Merchant Certification.

  • Where does a merchant get equipment to support the IIAS? Who installs it? Who do I call?

    Merchants might need new equipment or just updates to existing software to support IIAS processing. A number of POS vendors for the supermarket, chain drug store, and related merchants have updated their POS systems software to support IIAS processing. For clarification or confirmation, a merchant should contact its processing acquirer and/or POS software provider, the organizations providing your credit card / debit card solutions or the bank that provides credit card processing. Vendors will work with merchants to install any necessary updates.

    A new POS solution could be required for merchants that do not have a POS system that can support electronic inventory management, UPC scanning, and the additional fields used in the IIAS transactions that are required. Many POS solutions supporting the required elements of the IIAS exist in the market today. Contact your POS vendor or acquirer/merchant processor for information about POS systems that are available to support IIAS processing.


  • Will a merchant’s store name be listed on the SIGIS Merchant List?

    SIGIS has two merchant lists: first, the SIGIS IIAS Merchant List for merchants that are SIGIS-certified to process IIAS transactions, and second, the SIGIS 90% Rule Merchant List for merchants that have registered with SIGIS as meeting the IRS requirement as a store with 90% or more of gross sales from Rx/prescription and qualified medical products.

  • Will all FSA/HRA plan administrators permit their clients to use FSA/HRA cards at 90% Rule merchants?

    While a majority of plan administrators permit FSA/HRA cards to be used at 90% Rule merchants, there may be some that do not or whose employer clients do not permit it. This could mean that plan administrators in a merchant's market area may have elected not to authorize FSA/HRA card transactions at 90% Rule merchants.

  • Will merchants that register as SIGIS 90% Rule merchants need to flag their inventory using the SIGIS Eligible Product List?

    No. Merchants that register for the 90% Rule are not required to flag their inventory. Merchants will find the SIGIS Eligible Product List helpful in determining if 90% or more of gross sales are from Rx/prescriptions and Eligible Health Care Products.

  • Will merchants that want to register stores for the SIGIS 90% Rule List need to be a SIGIS Member?

    Yes, if they want to register with SIGIS. SIGIS provides a low cost membership option. The membership includes access to a detailed Eligible Product List that may be used for 90% Rule qualification determination. It is noted that there may be other merchant associations/organizations that also provide a 90% Rule program. SIGIS has no information about how those programs work.

  • What if the pharmacy window in a merchant’s stores would qualify under the 90% Rule, can the merchant register the cash register/POS terminal of the pharmacy area?

    No, that will not be permitted. The IRS requirement is that the gross sales of each store must be qualified as having gross sales that are at least 90% from Rx/prescriptions and over-the-counter Eligible Health Care Items.

  • What is different about the SIGIS standard than approaches implemented by some merchants?

    A merchant may develop its own approach that is compliant with IRS requirements for an IIAS, and then make separate contractual arrangements with individual Third Party Administrator or card issuer processors. With the IIAS standard developed by SIGIS, a broad range of participating merchants have been able to implement a solution that is recognized industry-wide, which enables acceptance of almost all FSA/HRA payment cards. Likewise, Third Party Administrators have implemented a common set of procedures that applies to IIAS transactions at participating merchants. The broad adoption of the SIGIS standard enables a more consistent consumer experience.

  • What is the impact of not supporting the Rx Amount in an IIAS transaction?

    The majority of the health care debit cards in the market today allow for the purchase of all qualified healthcare items found on the SIGIS Eligible Product List, however, there are a limited number of benefit plans that are designed to only reimburse Rx/Prescriptions. The impact of not supporting the Rx/Prescription Amount would mean denied transactions from those employer benefit plans. While these cards represent a minority of the FSA/HRA cards in the marketplace today, a merchant could limit the customers that can use their FSA/HRA cards by not supporting the Rx/Prescription Amount in the authorization request message. SIGIS strongly recommends that merchants support this field.

  • The cardholder swiped their card, but the TPA does not see a transaction, why?

    When TPAs experience transaction issues, they should speak with their card processor for specific details. It is possible that the cardholder was attempting to purchase items that the merchant did not have identified as SIGIS qualified items and, therefore, did not submit the transaction for authorization against the card identified as being for health care purchases.

  • Does a merchant need to implement an IIAS system based on its merchant category code (MCC)?

    Potentially, yes. The IRS states that cardholders’ use of a FSA/HRA card is limited to merchants and service providers with specific merchant category codes (MCC) related to health care, including physicians, dentists, vision care offices, hospitals, and other medical care providers. The FSA/HRA card can also be used at merchants or service providers that do not have health care related merchant category codes, provided that those non-health care related merchants or service providers use an Inventory Information Approval System (IIAS). It is required that attempts to use FSA/HRA cards at merchants or service providers without a health care related MCC code and who have not implemented an IIAS be declined.

    An IRS ruling highlighted merchants in categories such as supermarkets, grocery stores, discount stores, wholesale clubs, mail order vendors and web-based vendors that sell prescription drugs as examples of merchants that would not be considered health care related and would therefore fall into the class of merchants requiring the implementation of the IIAS system. Because of the broad range of the merchandise sold by many drug stores or pharmacies, the IRS has also specified that drug store and pharmacies are not to be considered medically related, and thus, must implement an IIAS capability. Additionally, drug stores and pharmacies where 90% of their products sold qualify as medically eligible items may qualify for the 90% rule exception.