Q: Cards are sometimes used to access funds in a health care flexible spending account or other similar benefit account. Typically, use of the funds in these accounts is limited to certain types of transactions and the purpose for which the funds are used is legally required to be substantiated by the plan administrator. In some cases, substantiation may occur directly through the card without the cardholder submitting separate documents and no other means of access to the funds exists other than through the card. In other cases, the cardholder may have access to the funds through both the card and by submitting a claim to the plan administrator. Does a card qualify for the exemption under § 235.5(c) if the cardholder may access funds from the account by submitting a claim to the plan administrator?
A: No. If a cardholder is able to access funds in a benefit account by means other than a card and such alternate, non-card means of access are not required to be provided to the cardholder under federal or state law or regulation, the card is not the only means of access to the funds in the account, notwithstanding the fact that federal or state law may restrict the purposes for which the cardholder may access funds in the account. However, if a cardholder is able to access funds in a benefit account only through use of the card, the card may qualify for the exemption even if the cardholder must submit separate documents to the plan administrator in order to substantiate that the funds were used for legally permissible transactions. (Added September 14, 2011)
This Q&A was obtained from FRB’s website, in a section for Regulation II (Debit Card Interchange Fees and Routing) Frequently Asked Questions, which may be found here: