IRS has new rules for the Benefits Card
IRS Guidance
In 2006, the IRS provided additional guidance regarding electronic payment cards such as the Benefits Card offered by BenefitHelp Solutions. The guidance allows electronic verification of card transactions at merchants without a health care-related Merchant Category Code so long as an Inventory Information Approval System (IIAS) is in place to ensure that cards are used only for eligible medical care expenses. When the electronic verification process (IIAS) is working, the participant is not required to submit their documentation for the covered expense.
Beginning January 2008
The Benefits Card can only be used at a location with a medical merchant code. This means you can pay for items at the pharmacy register (with a medical merchant code), but not the general grocery register, unless the store has an electronic verification process (IIAS) system in place. You can continue to use your card at a medical provider’s office or a medical facility. Examples of merchants that are considered medical are medical facilities, health practitioners, doctors, dentists and orthodontists. Examples of merchants that are NOT considered medical are grocery stores, supermarkets, colleges, universities, catalog merchants, department stores and discount stores.
Covered expenses at other merchants are still eligible for reimbursement under your Flexible Spending Account. Instead of using the Benefits Card you must pay for the service and submit the documentation and the claims form for reimbursement.
Beginning January 2009
The card can only be used at a pharmacy that has both a medical merchant code and an electronic verification process (IIAS) in place with the Benefits Card vendor.
Along with using the Benefits Card to pay for eligible medical expenses at IIAS merchants, you can continue using your Benefits Card at a medical provider’s office and medical facilities. Be sure to save your documentation incase it is requested for verification.
Covered expenses at other merchants are still eligible for reimbursement under your Flexible Spending Account. Instead of using the Benefits Card you must pay for the service and submit the documentation and the claims form for reimbursement.
1IRS Notice 2006-69
