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You’ve enrolled your employees in your new healthcare benefits package and explained what is and isn’t eligible for reimbursement. You thought you’d covered all your bases. But some of your employees are trying to file expenses for wellness treatments and fitness subscriptions that aren’t eligible as part of your pre-tax health plan.
This guide explains how an inventory information approval system can solve this problem. It’s a necessity for your employees and your business, saving you time, money, and headaches in the long run.
An inventory information approval system (IIAS) is a point-of-sale system merchants use to check IRS compliance for medical purchases made with flexible spending accounts (FSAs) or health reimbursement arrangements (HRAs). When someone shops for their prescription drugs, over-the-counter medication, or other healthcare expenses, the IIAS acts as a filter to prevent individuals from using their tax-advantaged healthcare funds on non-qualifying items.
An employee named Lexi needs to purchase a few items at a pharmacy using her FSA benefits card. At the checkout, the merchant uses an IIAS. Here’s how the payment transaction unfolds:
Auto-substantiation is simply the ability to automatically validate whether a debit or credit card expense is eligible, according to the rules of your FSA or HRA plan. It goes hand in hand with IIAS, which is the most popular method of validating these expenses. However, there are other options too, including:
An inventory information approval system offers numerous benefits for both merchants and consumers. These include:
Some types of healthcare coverage require employees to front the cost of their medical expenses before filing an expenses claim to receive a reimbursement. But paying for medical bills out of pocket is a huge worry for around half of U.S. adults who wouldn’t be able to afford an unexpected $500 bill.
An IIAS removes this worry by linking debit and credit cards to FSA or HRA accounts and using available funds instead. Employees remain firmly in pocket, don’t go into debt, and receive fast access to the treatment or medical purchases they need.
Retailers and healthcare providers who choose to use an IIAS can expect lower health benefit admin costs. Since the system automatically determines eligibility of medical purchases, there’s no need for employees to submit paper receipts or claims forms. This also reduces paperwork and streamlines the reimbursement process for your benefits admin team.
And it’s the same story on the employee side too. The point-of-sale approach removes the need to upload receipts or go through a long-winded reimbursement process. It’s convenient, accessible, and people-first.
Employees and employers need reassurance they’re using their pre-tax health funds appropriately, with no risk of an IRS penalty. An IIAS checks if any items of purchase match the eligible medical expenses described in Section 213(d) of the Internal Revenue Code. This is a comprehensive list, including a wide range of medical products and services including dental and vision care.
Benepass is a versatile employee benefits platform with auto-substantiation baked into our pre-tax plans. In 98% of cases, claims are substantiated electronically at the point of sale, thanks to cards layered with IIAS technology and partnerships with a range of medical, dental, vision, and pharmacy merchants.
In a small number of cases, an employee will attempt to purchase an item that either doesn’t match the copay amount or doesn’t provide enough detail in the transaction data. As a people-first platform, we never want employees to be inconvenienced or denied access to the healthcare they need. Here’s how we handle this situation to ensure compliance with the IRS:
Ready to prioritize convenience and compliance in your pre-tax accounts? See our IIAS and auto-substantiation processes in action by booking a free Benepass demo today. Alternatively, feel free to contact sales@getbenepass.com to connect with a benefits specialist.
