New Debit Card Rule Effective 1/16/2011

Effective January 16, 2011, the IRS has modified the rules covering debit card use when purchasing over-the-counter medications (OTCs). You will be able to purchase prescribed OTC medications using your FSA/HRA debit card if these requirements are satisfied:

• Prior to purchase, you present a prescription to the pharmacist who legally dispenses the OTC medicine or drug and assigns a Rx number to the prescription;
• The pharmacy retains a record of the transaction, including the Rx number, name of purchaser (or the name of the person for whom the prescription applies) and the date and the amount of the purchase;
• These records are available for inspection by your employer or its agent, such as the employer’s FSA/HRA vendor;
• The debit card system has been programmed to reject any OTC drug or medicine without a Rx number; and
• The debit card system meets existing IRS requirements that are intended to limit use of the debit card to only tax-qualified medical care expenses.

If these requirements are met, the debit card transaction will be considered fully substantiated at the time and point-of-sale; i.e., no further documentation will be required from a Health FSA participant to establish the eligibility of the purchased item.

P&A’s debit card system already has been re-programmed to meet the fourth requirement identified above. In addition, our debit card system is fully compatible with the Inventory Information Approval System (IIAS) that sellers of prescription drugs must use for their debit card sales to be considered approved at the point of sale without further claims substantiation. IIAS has been adopted not only by traditional pharmacies, but by mixed-use merchants, such as supermarkets, large drugstores and superstores. P&A’s debit card can be used for prescription drug purchases from any of these businesses. To view the list of merchants who have adopted or are in the process of adopting the IIAS system, go to our website at www.padmin.com, click on “Participants,” then click on “Benefits Card” and choose question number three, “Where can I use my FSA Benefits card?”