IIAS versus 90% Rule Comparison

Some drug stores and pharmacies have the option of supporting an IIAS or registering as a 90% Rule merchant. Additionally, plan administrators may elect to support IIAS and/or 90% Rule programs. The chart below highlights some of the key characteristics and requirements of each program.

	Merchant IIAS	90% Rule
Program description	IIAS transactions enable real-time verification that funds approved for debiting a FSA/HRA card account are for eligible medical items, as required by the IRS. Issuer/issuer processors utilize the IIAS data fields in authorization request transactions to approve and auto-substantiate eligible health care amounts.	After successful program registration, 90% Rule merchants accept FSA/HRA payment cards just like any other payment card; there are no additional technical requirements for merchants. Issuers/issuer processors support a list of 90% Rule merchant locations during authorization processing.
Qualification requirements	Any merchant that sells prescriptions/Rx or eligible health care items.	Limited to drug stores/pharmacies that have stores whose sales are primarily eligible medical items (90% or more of sales for each store registered must be from prescriptions or eligible health medical items).
Technical requirements for merchants	Merchants are required to make technical changes to support the following: Use the SIGIS Eligible Product List to flag eligible health care items in merchant’s inventory. Change payment card processing to add eligible health care amounts to transactions. Support a list of FSA/HRA BINs to identify card numbers to add IIAS data fields. Store transaction detail for approved FSA/HRA card transactions in the event of an IRS audit.	Drug stores/pharmacies are not required to make any technical changes.
Identification of prescription amounts	Yes, IIAS merchants have the option to include the Prescription/Rx Amount in addition to the Total Health Care Amount; this enables plan administrators to approve more FSA/HRA transactions.	Not applicable.
Merchant categories	Includes the following: 5411 – Grocery/Supermarket 5310 – Discount Stores 5300 – Warehouse Clubs 5499 – Convenience Stores 5912 – Drug Stores/Pharmacies 5122 – Druggist/Drug Proprietaries 5960, 5964, 5965, 5969 – Online Pharmacies Various MCC – Other Non-Health Care Merchants	Only the following: 5912 – Drug Stores/Pharmacies 5122 – Druggist/Drug Proprietaries
Cardholder required to submit a transaction receipt to plan administrator	Because transactions are auto-substantiated, cardholders are most likely not required to submit transaction sales receipts; although it is recommended that cardholders keep copies of transaction receipts.	Cardholders are most likely required to submit transaction sales receipts; cardholders are recommended to keep copies of transaction receipts.
Name of merchant list	IIAS Merchant List	90% Rule Merchant List
Transaction data retention	IIAS merchants are required to store the transaction detail for approved IIAS transactions in the event of an IRS audit for 5 years.	Not required.
Annual processes	IIAS merchants are not required to re-certify unless the merchant makes changes to software that affects IIAS-certified components.	The IRS requires annual registration and re-attestation that the sales of each registered store location are 90% or more from prescriptions or eligible medical items.
For more information	For merchants that operate their own inventory and cash register software, see IIAS Merchant Certification. For merchants that contract with a POS vendor/third-party servicer, see TPS Merchant Certification.	For drug stores/pharmacies that sell primarily prescriptions and eligible medical items, see 90% Rule Merchant Attestation.

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Related FAQs

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

Related FAQ

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.
What is the IRS 90% Rule and how does it relate to IIAS requirements?

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What is the IRS 90% Rule and how does it relate to IIAS requirements?

In IRS Notice 2007-02 and the subsequent Notice 2008-104, the IRS provides that drug stores/pharmacies (MCC's 5912 and 5122), which have 90% or more of gross sales that are Rx/prescriptions or over-the-counter Eligible Health Care Products, can be viewed as "health care merchants" by plan administrators in the debit card programs. Plan administrators are permitted to approve FSA/HRA card transactions at a drug store/pharmacy that meets the 90% Rule, if the drug store/pharmacy doesn't support an IIAS. The text of the IRS rulings are shown below:

IRS Notice 2007-2:

Accordingly, after December 31, 2008, health FSA and HRA debit cards may not be used at stores with the Drug Stores and Pharmacies merchant category code unless (1) the store participates in the inventory information approval system as described in Notice 2006-69, or (2) on a store location by store location basis, 90 percent of the store's gross receipts during the prior taxable year consisted of items which qualify as expenses for medical care under Section 213(d) (including nonprescription medications as described in Rev. Rul. 2003-102, 2003-2 C.B. 559).

IRS Notice 2008-14- Transition Relief:

The deadline in Notice 2007-2 is extended by six months so that, after June 30, 2009, health FSA and HRA debit cards may not be used at stores with the Drug Stores and Pharmacies merchant category code unless the requirements of (1) or (2) above are satisfied.
What certification is required to support the IIAS standard published by SIGIS?

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

Related FAQ

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.
What is the impact of supporting or not support the Rx Amount in an IIAS transaction?

Related FAQ

What is the impact of supporting or not support 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.