Important Information RE: 90% Self Registered Merchants

SIGIS has heard from some 90% Self Registered Merchants that they have experienced an increase in declines on FSA/HRA cards since July 1st. Merchants are questioning why the increase in declines given that FSA/HRA cards were being successfully processed prior to this date.


What happened on July 1?

On July 1st, plan administrators initiated new card processing rules and system controls in order to comply with new IRS requirements. These IRS requirements were implemented to ensure that consumers can only purchase eligible items with FSA/HRA cards. Prior to this date, most administrators allowed card transactions from pharmacies and drug stores without the merchant having an IIAS or being a registered 90% merchant.


Why are cards declining with 90% merchants now?

Inaccurate information may have been entered on the 90% Application Form.


As a merchant, you may have opted to register your store locations with SIGIS to identify yourself as being eligible for the 90% merchant classification. In IRS Notice 2007-02, the IRS provides that drug stores/pharmacies, which have 90% or more of gross sales that are prescriptions/Rx or over-the-counter Eligible Healthcare Products, can be viewed as “healthcare merchants” by plan administrators in the debit card programs. In order to complete your registration, you were required to enter unique store identification information provided to you by your acquirer. The accuracy of this data is critical as this information is used to identify your location(s) as valid 90% merchant locations in the card transaction approval process.


In addition, some plan administrators and card processors will be proactively researching transaction declines and attempting to identify data validity issues. As issues are identified, acquirers will be notified so that they can work with merchants to correct these data fields.


Why are some cards declining while other cards are accepted?

If some of your FSA/HRA card transactions are being processed successfully, but it appears that you are experiencing intermittent declines, the data you entered on the application is most likely correct. The reason for your intermittent declines may be that some plan administrators and/or employers have opted to not allow their cards to continue to work at 90% Merchants. If that is the case, then cards for these programs will no longer work at your location unless you implement an IIAS.


One note, as with all payments cards, there can be a variety of reasons for declines such as insufficient funds card has not been activated, etc. Not all card declines are necessarily related to 90% merchant status. If you have further questions about card transaction processing please contact your acquirer.