Merchants

As a paid Member of SIGIS in good standing, a merchant is able to confirm the status of its SIGIS 90% Registration or IIAS Certification status by visiting the Publications page.

Please note that the 90% Merchant list is updated each Monday morning and the IIAS Merchant list is published at 5 am PST each business day.

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.

Generally, yes. The IRS requires that FSA/HRA purchases be substantiated. As the 90% rule does not provide substantiation, plan administrators will apply their standard substantiation processes to transactions at these locations. 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. In some cases the plan administrator may be able to match a transaction amount with other data such as Pharmacy Benefit Management (PBM) co-pay on prescriptions to complete substantiation and not require the customer to submit a sales receipt. But in the absence of an automated matching program like this, it is likely that customers using an FSA/HRA card will be asked by their plan administrator to submit a sales receipt.

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. To maximize authorization rates, merchants should support partial authorization, RX amount and non-eligible items when implementing an IIAS. In addition, normal decline issues can occur for expired cards, insufficient funds, cards not activated and other business reasons.

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 merchants will benefit from higher card authorization rates and consumers will benefit from the auto-substantiation of IIAS transactions.

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.

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.

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. 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 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. NOTE: If your Acquirer supports PIN FSA transactions there may be additional Acquirer Ids required based on which PIN network is supported. Contact the SIGIS Help Desk if information on PIN FSA is needed.

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.

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.

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.

Merchants might need new equipment or just updates to existing software to support IIAS processing. 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. 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.

Additionally, merchants can review the SIGIS POS Solution Provider list.

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.