POS Software Upgrades Will Simplify FSA Card Acceptance and Compliance

DALLAS, Jan. 13, 2008 (PRIME NEWSWIRE) -- Retalix Ltd. (RTLX) and subsidiary StoreNext Retail Technologies will help grocers of all sizes meet new federal mandates for Flexible Spending Arrangement (FSA) and other health-care debit cards through upgrades to Retalix's StoreLine point-of-sale (POS) software, as well as StoreNext's ISS45 and ScanMaster POS applications.

Under Internal Revenue Service (IRS) rulings, grocery stores must implement an Inventory Information Approval System (IIAS) as of Jan. 1, 2008 in order to accept shoppers' FSA, HRA and similar benefit cards. POS systems with IIAS must limit tenders from such cards to the amount of the qualified health-care products in the order. Implementing an IIAS will also require grocers to modify their files and update their file maintenance and back-office applications, hosting software and electronic payments software to support the POS system's IIAS.

Payment networks now automatically decline all shopper FSA and health-benefit debit cards tendered from grocery stores that have not implemented IIAS support.

In addition, the IRS further mandates that merchants must archive copies of all such health-care transactions for five years with full item detail to demonstrate compliance. Retalix and StoreNext will offer fully automated remote storage and flexible reporting of this information for a low monthly fee through its hosted Connected Services solution. This new FSA Archive system will plug-and-play with StoreLine, ISS45 and ScanMaster systems, and it eliminates the need for grocers to invest in secure long-term data storage systems and data mining applications.

"Grocers must meet the new federal mandates to keep payment choices open for their shoppers," said Ray Carlin, executive vice president of sales and marketing for Retalix USA. "Our StoreLine, ISS45 and ScanMaster POS systems fully satisfy these directives without complicating the checkout process, while our new FSA Archive service dramatically simplifies FSA storage requirements and reduces compliance costs."

The list of qualified health-care products for FSA card payment includes thousands of over-the-counter health and beauty aids, including aspirin, cold relief tablets, special soaps or acne medicines, band-aids and even hearing-aid batteries.


Since the networks no longer accept FSA transactions from grocery stores that haven’t updated their software with IIAS, some grocers have considered encoding a stand-beside terminal as if it were in a pharmacy and running FSA transactions from there. This is also being pushed by some payments industry salespeople trying to get extra terminal and line commissions.

Notice 2007-2, relating to Rev. Rul. 2003-43, 2003-1 C.B. 935 regarding use of electronic media for employer-provided medical expense reimbursements:

After December 31, 2007, health FSA or HRA debit cards may not be used at any store, vendor or merchant that does not have health care related merchant category codes unless the store, vendor or merchant has implemented an inventory information approval system as described in Notice 2006-69.

Since health-care is never a supermarket’s primary business, they cannot legally use a health-care related merchant category code (MCC) in any of their payments terminals.

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