What is the IRS 90% Rule for Flex Debit Cards?
Health care FSA and HRA debit cards are a simple and convenient way to pay for prescriptions and eligible over-the-counter medicines. A flexible spending account debit card acts like a credit card that holds your pre-tax money in an account to use for eligible medical and health care expenses. As of June 30, 2009, the IRS implemented a 90% rule that relates to FSA and HRA expenses paid for with a health care flex debit card.
Where Can I Use My FSA/HRA Debit Card?
In order to comply with the IRS 90% Rule and be able to accept FSA/HRA debit cards, a drug store or pharmacy must meet one of two requirements. These merchants must either have an Inventory Information Approval System (IIAS) in place or certify that 90% of the pharmacy’s gross receipts during the previous year must consist of items that qualify as expenses for medical care under Section 213(d) of the IRS code. A qualified medical or health care expense includes nonprescription medications such as over-the-counter items in addition to prescription drugs.
What Over-the-Counter Items Can I Purchase with My FSA Card?
Your FSA health care debit card can be used to purchase a variety of nonprescription or over-the-counter medications using your pre-tax dollars. Here is a list of some of the most common eligible FSA over-the-counter items.
- Reading glasses
- Monitors and test kits
- Birth control
- Pregnancy tests
- Bandages and band-aids
- See a complete list of FSA eligible expenses
How Does a Health Savings Account Differ From an FSA or HRA?
A Health Savings Account or HSA combines the best features of a flexible spending account (FSA) and a health reimbursement arrangement (HRA). Employees can make pre-tax contributions to their health savings account and use the funds for current and future qualified medical and retiree health care expenses. An HSA is a savings account that acts like a retirement plan for health care. Any unused contributions to an employee’s HSA can be rolled over from year to year and earn tax-free interest until you need to use this money. A health savings account is an ideal way to plan for large medical expenses that you or a member of your family may incur in the future.