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Drug Store/Pharmacy Merchants Must Support IIAS Solution

Effective July 1, 2009, drug store and pharmacy merchants must support an IIAS solution if they wish to continue processing Benefits Card transactions.

The IRS initially issued regulations in 2007 limiting the use of Benefits Cards to health-care related merchants and merchants who have an Inventory Information Approval System (IIAS) in place. The Inventory Information Approval System (IIAS) is the method by which a retailer’s point of purchase program recognizes an FSA/HRA eligible item (as described in Section 213(d) of the Internal Revenue Code). This pre-established list of eligible medical expenses is electronically referenced by the merchant at the point of sale and, if the item being purchased is on the list, the transaction will be automatically approved with no need for additional documentation to be provided. You will be prompted by the merchant to use an alternate form of payment for any non-eligible FSA/HRA items.

Over the past 2 years, the IRS has been working steadfastly on finalizing these regulations for merchants. Please note that after June 30, 2009, Benefits Cards will not be accepted at pharmacies, drug stores, discount stores, grocery stores and other merchants unless the location has IIAS in place. The Benefits Card will be denied at the point of service.

Please visit www.sig-is.com and select IIAS Merchants List for the most recent list of participating IIAS merchants. The IIAS Merchants List is updated daily as updates are available, so it is recommended that you do not print the list; instead, visit the website each time you wish to check on the status of a particular merchant.

Overall, IIAS has been a great success by helping to reduce the substantiation requirements under the IRS guidelines. We continue to see more and more merchants starting the implementation process which can only further enhance the administration.
If you have any additional questions regarding this ruling, please visit www.irs.gov and Search IIAS to view Internal Revenue Bulletin - January 8, 2007 - Notice 2007-2 , or you may contact Flexible Benefit Administrators, Inc. at (800) 437- FLEX.

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