The FSA Debit Card card is a type of debit card issued in the United States. This can access tax expense accounts such as flexible FSA ( FSA ) and health reimbursement accounts ( HRA ), and sometimes health savings accounts ( HSA ) as well.
All of these cards to date bear the Visa, MasterCard, or Discover brand and operate through their main network; so all FSA debit card transactions are of various offline (also known as "debit signatures" or, inaccurate but generally, "credit"). This can be confusing to merchants like Wal-Mart trying to "redirect" debit cards to online debits (aka "debit PIN" or simply "debit"); FSA debit cards will not work that way.
Video FSA debit card
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Although this card may be issued with HRA and HSA and FSA, the FSA is the oldest and most common of these accounts; Therefore, for simplicity these cards are often referred to as "FSA" debit cards. Walgreens and Drugstore.com have "FSA shops" designed for use with these cards, whether tied to a medical FSA, HRA or HSA. The Ecommerce vendor, called FSAmarket.com, is created with a special FSA/HSA card in mind and is an "FSA Store" in and of itself.
Although some FSA debit cards are also issued for maintenance and transportation costs, most are spent on medical expenses. (The rest of this article deals only with FSA debit cards used with FSA medical, HRA or HSA.)
Traditionally, to meet the provisions of the Internal Revenue Service (IRS), the FSA can only be accessed through claims for reimbursement after generating (and usually paying) out-of-pocket costs, often after deductions have been made from employee salaries to fund the FSA; this is commonly known as "double dipping". This, along with the so-called "using it or losing it" rule (ie, all funds not spent are charred), has long been seen as one of the problems of minimizing the utilization of the FSA.
FSA debit cards are developed to avoid this problem by allowing users to access their OJKs directly without "double dyeing", and also (if possible) to provide methods to automate the IRS proving requirements that often require multiple documents and labor. Strengthening FSA debit card transactions without documents is known as "automatic adjudication".
HRAs, introduced later, technically do not involve "double dyeing" because it is funded by corporate funds, not by employee funds; However, they are subject to the same IRS requirements as the FSA, and thus are generally accessed only by paper or debit card claims such as the FSA.
Unlike FSAs and HRAs, HSAs do not require proof before withdrawal; users only need to keep their receipts with their tax paper. However, since most HSA providers come from the background of OJK and HRA, most offer proven services for HSA similar to those for FSA and HRA. Although many HSA providers offer unlimited debit cards and even credit cards with their accounts, some voluntarily choose to issue HSA debit cards and apply the same restrictions on their use as required by the IRS for the FSA and HRA.
Flexible Spending Accounts (FSAs), commonly referred to as the "Section 125" plan or "Cafeteria" plan, were developed as part of the Internal Revenue Code Section 125 to provide employees with tax breaks for unpaid daily medical treatment and dependence expenses. The FSA allows employees to utilize the money before taxes and keep Federal, FICA, and, in most cases, state taxes when paying for eligible costs that are not covered by traditional insurance plans.
Maps FSA debit card
Where FSA debit cards can be used
Unlike other debit cards, the IRS does not allow FSA debit cards to be used in any merchant receiving Visa or MasterCard. In contrast, only the following types of merchants may accept OJK debit cards, typically enforced using the "merchant category code" or "merchant type code" assigned by Visa and MasterCard:
- Medical providers such as doctors and hospitals.
- Merchants with inventory information approval system (IIAS). In IIAS, trader flags the "FSA-eligible" item in its point of sale database so that they can be separated from all other items by the scanner (brick-and-mortar) or online shopping cart; then only allow the "FSA-eligible" item to be charged to the card, with any other form of payment required to purchase all other items.
- As of December 31, 2007, all online wholesalers, discounts and pharmacies. This merchant must install IIAS to receive the card after this date.
- As of December 31, 2008, all "true pharmacies" (i.e., not located within the grocery store or discount and not online). They must install IIAS after this date, unless 90% or more of their sales are eligible items of the FSA (recipes or items sold freely).
IRS requirements
Based on the IRS Transfer Decision 2003-43, any transaction on FSA debit card must be proven or recovered from the employee. Substance can be through an electronic proof (auto-adjudication) or a paper receipt sent by the user (similar to a paper claim). The process of getting a receipt or replacement when auto-adjudication is not possible is known as "pay and pursue", the term IRS is also used in its most recent verdict (Notice 2007-02).
The most common method of auto adjudication is known as "copay matching". Under the 2003-43 Ruling as reinforced by the Notice 2006-69, OJK or HRA providers must obtain from the employee health plan the number of standard copayments for the plan. If the payload is exact equal to between one and five of the payment amount, it may be automatically tried and approved without a receipt. If a health plan has a different amount of copayment for a particular type of fee, a valid number of copayment copies can be approved, up to five times the highest possible copayment amount.
Also, charges may be automatically prosecuted if they are accompanied by electronic information proving that the fee is for medical purposes. This can be done through means such as entering the details of a chargeable transaction (Decision 2003-43) or forwarding a health plan explanation of the benefits to OJK or HRA providers for further processing (Notice 2006-69).
Under the 2006-69 Notice, all fees from merchants with IIAS may also be tried automatically; however, starting in 2007 merchants must provide a detailed record of all such transactions for IRS reviews to employers. This can be done automatically or in response to an IRS audit of the company.
If the fee is not proved by auto-adjudication or receipt, the OJK provider or HRA must cover the fee and suspend the card until it is recovered. In addition to voluntary compensation methods, employers usually use payroll deductions, as well as offset compensation for future paper claims. If all else fails, the employer may add the cost amount to the W-2 employee as taxable income.
References
- IRS Rules 2003-43
- IRS Notification 2006-69
- IRS 2007-02 Notice
- SIGIS - Special Interest Group for IIAS
- Most information published on FSA debit cards (other than the IRS) is found on the FSA vendor's website:
- AmeriFlex
- myCafeteriaPlan
- BenefitsGorkshop Benefits Card
- Online "FSA store" that accepts FSA debit cards through IIAS:
- FSAmarket.com
- fsastore.com
- drugstore.com
- Walgreens
Source of the article : Wikipedia
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