IIAS Requirements for FSAs and HRAs
The Inventory Information Approval System and what it means for cardholders, employers and administrators. 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, such as supermarkets and drug stores, to use an IIAS in order to auto-substantiate FSA/HRA cards at the point of sale. Other health-related merchants may use one as well.
When an employee goes to the store to pick up a prescription (or to any non-medical retailer to pick up a qualified health item), they will only be able to complete the purchase using their Visa Healthcare & Benefit FSA or HRA card if the store has installed an IIAS in their point-of-sale system. The IRS adopted this requirement in 2006, so most retailers will likely have this installed. The rule virtually eliminates accidental non-qualified purchases and helps reduce paperwork associated with benefit administration.
In order to establish and oversee standards for Inventory Information Approval Systems, The Special Interest Group for IIAS Standards (SIGIS) was formed. Visa is a founding member.
How It Works
The IIAS segments products at check-out...
An IIAS is a process used by the merchant in their point-of-sale (POS) system to identify eligible healthcare products when the customer is paying with an FSA or HRA card. The merchant's POS system compares products being purchased with eligible healthcare products that the merchant has flagged via use of inventory control information like brand, UPC, or SKU number.
...And communicates with card issuers for approval
The merchant's POS system totals the amount of eligible healthcare products and inserts the amount attributable to such products (usually the Qualified Healthcare Amount) in a designated field in the authorization request message, along with other required data fields. This information is passed to the card issuer for approval.
Where Visa FSA and HRA cards can be used
Merchants with a Healthcare MCC
Visa FSA/HRA cards can be used at all healthcare merchant locations, like doctors, dentists or hospitals, where Visa cards are accepted.
SIGIS-approved non-healthcare merchants
Visa FSA/HRA cards can also be used to make eligible healthcare purchases at SIGIS certified merchant locations that have implemented an IIAS such as most drug stores and supermarkets.
For a full list of SIGIS certified merchants, visit the SIGIS website
IIAS non-healthcare merchants
Some non-healthcare merchants have implemented their own proprietary IIAS solutions and Visa FSA/HRA cards may also be able to be used to make eligible healthcare purchases at these merchants.
IIAS for cardholders
Less need to send in receipts
Cardholders can use their Visa FSA and HRA cards at participating merchants with confidence and convenience. 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.
Visa FSA and HRA cards may be declined for a number of reasons. Some of the most common are:
- Card not activated
- Insufficient account balance
- Purchase of non-eligible items
- Card use at a non-IIAS/SIGIS-certified merchant location
For more information on a specific reason for a Visa FSA or HRA card decline:
- Merchants - contact your acquirer
- Benefit Administrators - contact your processor
- Employers - contact your benefit administrator
- Cardholders - contact your benefit administrator or as directed on the back of your card
Non-healthcare merchants that implement IIAS will gain the ability to consistently identify FSA and HRA cards and eligible healthcare products, as well as to promote potential loyalty among their customers.
Reduced plan administration costs
The IIAS arrangements 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 programs.
Special Interest Groups for IIAS Standards
Founded to establish a voluntary industry standard
The Special Interest Group for IIAS Standards, also known as SIGIS, was founded by a group of companies that support FSA and HRA debit card transactions. The goal of SIGIS is to establish a voluntary industry standard intended to meet IRS requirements for operating an IIAS. SIGIS is composed of a broad range of companies, including retailers, card issuers, third party plan administrators, merchant acquirers, processors, financial institutions, trade association groups, software vendors and payment card networks.
The IRS IIAS ruling provides that in order for a FSA/HRA payment card to be used, non-medical merchants must verify, in real-time, that purchases made with an FSA/HRA payment card are restricted to eligible healthcare (213(d)) products only. 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.
Visa is a founding member of SIGIS and helped lead the effort to develop the industry standards for IIAS.