Can You Afford To Lose Business By Being Non-IIAS Compliant?
This is a very serious question in today’s pharmacy industry. An IRS mandate promotes an electronic process for using flexible spending cards which will save you and your pharmacy customers a lot of time and paperwork. However, if your POS system was not IIAS-compliant by December 31, 2008, and you have not signed up as a 90% merchant, you will be unable to accept and process flexible spending cards as a service to your patients. As the use of the flexible cards increases, patients will go to pharmacies that can process them. Pharmacies that delay responding to this deadline now could end up losing a portion of their pharmacy business.
For more information, see the topics below.
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IIAS compliancy has been completed for Slim CD, Heartland Payment Systems and Shift4.
Freedom Data Systems has completed our PA-DSS compliancy certification. You will find our listing at https://www.pcisecuritystandards.org/security_standards/vpa/
Once at the site click on Get the List of Validated Payment Applications and search for Freedom Data Systems.
IIAS regulations, SIGIS, Flexible Spending Account Cards
and What They Mean to Your Business
History
In 2007, the IRS mandated that to continue to accept flexible spending cards, an Inventory Information Approval System had to be in place beginning January 1, 2008 for all retail stores that did not fall under the Merchant Category Codes (MCC) that define typical drug stores and pharmacies. This meant that the larger retailers including supermarket and warehouse chains had to have an IIAS system in place by the first of January 2008 or risk losing business to independent drug stores.
The IRS mandated that typical drug stores and pharmacies that fell under MCC 5912 (and a few other similar codes) had to have an IIAS system in place by January 1, 2009 if they want to continue to accept flexible spending cards (continuing to compete with the supermarket and warehouse chains). [The one exception to the ruling is discussed later in this document.] This one-year grace period gave the POS software providers and the pharmacy community a chance to get a system in place that would meet the IRS requirements.
Freedom Data Systems and other POS vendors in the pharmacy industry worked on solutions for this IRS mandate for up to a year prior to the deadline and the associated credit card gateways and processing companies were also working on their end to get everything in place. This was a huge undertaking as all kinds of certification processes need to be completed by various vendors.
Currently in the Industry
Today, pharmacy and drug stores that fall under MCC 5912 (and others) are able to process flexible spending cards just like they process a credit card. POS vendors, credit card gateways and processors are continuing their efforts on the necessary certifications. New recommendations and industry standards continue to be released, including a revised EPL (Eligible Product List) where many medicine type items were removed and are now unavailable for purchase with a flexible spending card unless filled as a prescription. Pharmacies that do not have an IIAS system in place and have not been classified as a 90% merchant with their credit card processor will have flexible spending cards declined when swiped through their systems. Currently, there is no way to have an IIAS system in place without a POS system. The third party card swipes that reside beside electronic cash registers are still not IIAS compliant.
IIAS Exemption
There is one exemption to the IIAS ruling. The IRS has indicated that if 90% or more of your total sales for the previous year were qualified products then you do not have to have an IIAS system and you will still be able to accept flexible spending cards. Many pharmacies and drug stores fall under this ruling.
Under the 90% rule you will be able to process flexible spending cards but your customers will still need to retain the receipts and possibly have to send them into their plan administrator for substantiation.
Can you afford to lose business?
Currently, the large chains and wholesale clubs are continuing to aggressively market to customers who use flexible spending cards. They are convincing customers who do not know the regulations they have to use their flexible spending cards at particular locations. This is being done through co-branding of cards and the use of other marketing tools. If you are IIAS compliant, educate your customers and let them know that you can accept their HRA or HAS cards.
Now is the time to act
Studies in human behavior indicate that most people will take the path of least resistance. These days, families are juggling two careers and running kids to baseball practice, soccer games, or dance class. As the marketing tools in use by stores who have IIAS-compliant POS systems reaches the general public—which is already happening—existing and potential customers will use their flexible spending cards at locations where they do not have to deal with paperwork. We believe this to be the plain, simple truth. Pharmacies that cannot accept flexible spending cards will very likely see their business decline as the use of these cards increases.
The bottom line is can you afford not to accept these cards at your pharmacy?
I have a Freedom Data POS System
Freedom Data Systems has enhanced your PRO POS software so that you have the tools necessary to certify your store to accept flexible spending cards. If you wish to accept flexible spending cards then you MUST follow the steps outlined below.
- Have your PRO/POS software updated.
- Join the Special Interest Group for IIAS Standards (SIGIS) as a tier IV member. The cost to join as a tier IV member is $250.00 per year. This membership provides you with access to the Qualified Product List (QPL)—which contains the description and UPC code of FSA-eligible products—necessary for the certification and acceptance of FSA/HRA cards.
- Go to the SIGIS home page.
- Select Join and then Membership Signup Form.
- Download and complete the membership application and send it in ASAP. (Submit your application early to avoid the year-end rush of applications.)
- After you join, send proof of your membership to support@freedomdata.com. Your account will be modified so that you can download the Qualified Product list.
Notes:
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• | If you own multiple locations you only need to join once to cover all the stores under your corporate ownership. |
| | • | If you are a pharmacy that has elected to use the 90% exception rule then you may still want to join SIGIS so that you
have access to the Qualified Product list. You may find that this list is necessary to assist your customers in
substantiating their claims. |
- After your POS software is updated, you must become IIAS-certified by your MSP/Processor. Your MSP or Processor is the company you pay each month for credit card transaction fees.
- Download and complete the Merchant Certification Self-Assessment form.
- Send the completed form to your MSP or Processor for certification.
Note: Freedom Data Systems has no control over this process. Please contact your MSP/Processor for more information on their certification process.
- Your MSP/Processor will review your self-assessment and once approved, will send it to SIGIS. After SIGIS receives the form, they will add your pharmacy to the list of IIAS-compliant merchants posted at the SIGIS Web site. They will also send you something you can display in your store front to indicate you are IIAS-compliant.
Note: The IRS has listed one exemption to the IIAS ruling thus far, referred to in the pharmacy industry as “the 90% rule.” For information on the 90% rule, contact your credit card processor for their requirements to satisfy a 90% ruling for your store. Be sure that you understand that transactions processed at stores utilizing the 90% rule will not be automatically substantiated.
I have a non-IIAS POS System
If your current POS system is non-IIAS compliant, you should contact your POS provider immediately and and ask if they have updated their system to be IIAS compliant. If your current system will not be IIAS compliant or you are in need of a new POS system designed specifically for retail pharmacy, please contact our sales department at 800-932-9000. Our experienced staff will work with you to determine a configuration to meet your needs, provide you with various options available for purchasing our PRO/POS Point of Sale System, and work with you to ensure that you are IIAS compliant.
I don’t have a POS System
It is estimated that up to 60% of independent pharmacies do not have a POS system in place today.
To be sure, POS systems are a major investment, require employee training, and sometimes make you rethink the way you run your business. But in the coming years, flexible spending cards accounts will likely become more popular. An IIAS-compliant POS system will allow you to continue to meet the needs of patients with FSA credit cards.
For information on purchasing a Freedom Data POS System, please contact our sales department at 800-932-9000.
