IIAS vs 90% 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 (Included TPS Merchant)90% Rule
Program Description IIAS transactions enable real-time verification that funds approved for debiting an 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.

Issuer/issuer processors utilize the IIAS data fields in authorization request transactions to approve and auto-substantiate eligible health care amounts. 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 MerchantsMerchants 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 FSA 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 AmountsYes, 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 CategoriesIncludes but not limited to the following:
  • 5122 – Druggist/Drug Proprietaries
  • 5300 – Warehouse Clubs
  • 5310 – Discount Stores
  • 5411 – Grocery/Supermarket
  • 5499 – Convenience Stores
  • 5541 – Service Stations
  • 5912 – Drug Stores/Pharmacies
  • Various MCCs – Any Other Non-Healthcare Merchants
Also, some healthcare merchant MCCs that wish to provide IIAS data for consumer substantiation.
Only the following:
  • 5912 – Drug Stores/Pharmacies
  • 5122 – Druggist/Drug Proprietaries
Cardholder Transaction Receipt RequirementsBecause 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 ListIIAS Merchant List90% Rule Merchant List
Transaction Data RetentionIIAS 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 Process RequirementsIIAS merchants are not required to re-certify unless the merchant makes changes to software that affects IIAS-certified components or if the merchant changes acquirers.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.
Related FAQs

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.

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.

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.

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.