Your Pre-tax Forma Card may be declined at some merchants that you would assume would be approved. Below are some common examples of merchants where this may occur:
- Drug Stores and Pharmacies, e.g. Walgreens, CVS (MCC: 5912)
- Grocery Stores, Supermarkets, e.g. Amazon (MCC: 5411)
- Drugs, Drug Proprietors and Druggist Sundries (MCC: 5122)
- Wholesale Clubs (MCC: 5300)
- Discount Stores (MCC: 5310)
- Department Stores (MCC: 5311)
- Variety Stores (MCC: 5331)
These merchant category codes (MCCs) would be approved if pulling funds from your HSA account, but may be declined when pulling from your FSA account.
What the above merchants have in common is that they sell a broad range of merchandise some of which may not be eligible under your FSA plan. Because these merchants sell a variety of products, the IRS requires that supermarkets, discount stores, wholesale clubs, mail order vendors, and web-based vendors implement what’s called an Inventory Approval System (IIAS) to accept FSA cards as payment.
It’s possible that IIAS is in place but not for all cash registers in a store. You can try another terminal, or pay out-of-pocket and file a claim for reimbursement.
Additionally there is a 90% rule which states that a store's total receipts must be composed of at least 90 percent of items which qualify as expenses for medical care.
The merchant must be registered under the 90% rule or have an IIAS system in place to accept FSA cards.
Use the IIAS Store Locator to find pharmacies that are registered under the 90% rule or have an IIAS system in place.
Using LPFSA funds at a pharmacy
Pharmacy transactions will not be charged from your LPFSA, because it is difficult to tell if the pharmacy expenses are for dental/vision or if it’s regular medical/pharmacy expenses based on the information we receive from the merchant. If you would like to use your LPFSA funds at the pharmacy to get dental/vision eligible items (e.g. Contact Solution), please pay out-of-pocket and submit a claim under your LPFSA to avoid the card pulls funds from your HSA or FSA.