IIAS Requirements for FSAs and HRAs

An IIAS, or Inventory Information Approval System, is a feature of a point of sale system that identifies eligible purchases for HRA and FSA plans. The IRS requires non-healthcare merchants that sell eligible healthcare products, such as supermarkets and chemists, to use an IIAS in order to auto-substantiate FSA and HRA transactions at the point of sale. Healthcare merchants are not required to have an IIAS but may use one as well.

The IRS adopted this requirement in 2006 and most greengrocers and chemists have this installed. The rule virtually eliminates accidental non-qualified purchases and helps reduce benefit administration paperwork.

The IIAS integrates with the merchant’s POS system to classify items being purchased as eligible or non-eligible healthcare items.  The merchant system then populates IIAS fields in a standard payment transaction and transmits the authorisation request to the issuer using the standard payment card process. The issuer is then able to decision the transaction based on the data in the IIAS fields and other transaction fields. 

Visa FSA and HRA cards can be used at a variety of locations that accept Visa Debit Cards.

These include: 

• Merchants with a Healthcare Merchant Category Code (MCC), such as doctors, dentists or hospitals 
• SIGIS-certified non-healthcare merchants that have implemented an IIAS, such as most chemists and supermarkets 
• IIAS non-healthcare merchants that have implemented their own proprietary IIAS solutions  

IIAS arrangements facilitate auto-substantiation at the point of sale and help reduce costs for employers and benefit plan administrators. These include decreases in paperwork and other staff expenses, as well as increased employee satisfaction and participation in HRA and FSA programmes.

IIAS for Cardholders

Here’s what you need to know to ensure your employees have a smooth experience with their Visa FSA or HRA card. By clearly communicating these key features and benefits, you can help your employees use their cards with confidence.

Less need to send in receipts. IIAS requirements facilitate auto-substantiation at the point of sale and reduce the number of times cardholders have to send in sales receipts after using their Visa FSA and HRA cards.

More places to use the cards. Cardholders can use their Visa FSA or HRA cards to purchase eligible healthcare products at non-healthcare merchants with IIAS in place.

Common reasons cards are declined. Visa FSA and HRA cards may be declined for a number of reasons. Typically, this is either because the card is not activated, there is an insufficient card balance, cardholder made an ineligible purchase or the card was used at a non-IIAS/SIGIS-certified merchant location.

Here’s where to go for more information on a specific reason for a Visa FSA or HRA card decline:

• Merchants - contact your acquirer
• Benefit Administrators - contact your processor or issuer
• Employers - contact your benefit administrator
• Cardholders - contact your benefit administrator or follow the instructions on the back of your card  

SIGIS – or the Special Interest Group for IIAS Standards – was founded by a group of companies that support FSA and HRA debit card transactions. These companies range from retailers, card issuers, third-party plan administrators, merchant acquirers and processors to financial institutions, trade association groups, software vendors and payment card networks. Their common goal is to establish a voluntary industry standard intended to meet IRS requirements for operating an IIAS. Visa is a founding member of SIGIS and helped lead the effort to develop the industry standards for IIAS.

The IRS IIAS ruling provides that in order for an FSA or HRA payment card to be used, non-medical merchants must verify - in real-time - eligible products (under IRS section 213(d)) to ensure purchases made with FSA/HRA funds are restricted to eligible products.  The SIGIS IIAS standard defines a process whereby merchants pass transaction information on to the issuer for decisioning to satisfy IRS requirements. Additionally, retailers that implement an IIAS and begin to identify eligible healthcare items on all sales receipts will be more FSA-friendly for all customers. Implementing an IRS-compliant IIAS through SIGIS allows for uniformity in the list of eligible healthcare products and SIGIS quality control through oversight and merchant certification.