The IRS requires plan administrators to approve FSA/HRA debit card transactions from a non-health care merchant only when the merchant supports an inventory information approval system (IIAS). The IIAS system is a combination of inventory management and point-of-sale systems that manage the following three functions:
Confirm the health care eligibility of items purchased with a FSA or HRA card, by accessing eligibility flags in the merchant’s inventory database when merchandise is purchased with a FSA/HRA card.
Generate a payment transaction that contains the required IIAS information.
Support an information archive system that allows the merchant to respond to an IRS audit 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 promotionally packaged branded items. SIGIS provides an Eligible Product List, a list of nationally-branded eligible products, to its Members.
- A Health Benefit Card Identification Capability to identify FSA and HRA cards via Bank Identification Number (BIN) ranges of all FSA and HRA cards. The list of required BINs is provided by the merchant's acquirer. IMPORTANT: SIGIS does not provide the FSA/HRA BIN List. Merchants must make arrangements with their acquiring processor or POS vendor to receive an initial copy as well as monthly updates. Inquiries submitted to SIGIS about getting the FSA/HRA BIN List will only delay an inquiry to the merchant's acquiring processor.
- A POS payment card authorization system that generates IIAS transactions containing all of the required FSA amount fields,and an IIAS flag indicating an IIAS system was used. This system should also 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 found on the Join SIGIS page.