Reminder: IRS 90% Rule Goes into Effect July 1st, 2009

The IRS 90% rule for pharmacies will be taking effect on July 1st, meaning that beginning this week, benefit-linked FSA debit cards (including the mySourceCard®) will only work at pharmacies which either have an Inventory Information Approval System (IIAS) in place, or generate 90% of their transactions from the sale of eligible items.

Currently, healthcare locations at which eligible items can be purchased are flagged by their Merchant Category Code (MCC) and include doctors' offices, hospitals, pharmacies, etc.  As of July 1st, pharmacies will not necessarily have a valid MCC and therefore, must have an IIAS in place or meet the 90% rule. 

Possible Issues

Some IIAS pharmacies will have declines, usually because the location fails to send the IIAS flag for a transaction. In the past, given that pharmacies were a valid MCC code, we have been able to check to see if the transaction took place at a qualified MCC location. Such authorization attempts will be declined.

In one specific instance (RiteAid), IIAS flagging failure is being caused by running the card as Debit or Credit. When the card is run as Credit at RiteAid, the IIAS does not send us the flag for the transaction. RiteAid is educating their clerks and working on fixes to their system to control whether a card is recognized as Credit, Debit, or FSA, but you may still experience some declines in the short run.

For a complete listing of IIAS & 90% merchants, click here.

If you have any questions please email info@idpas.com or call 1-877-685-0655.

Thank you,
Carrie Stout, CFCI,
Director,
DataPath Administrative Services, Inc.