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					       Flex Benefits News Flash                                                                                                                 ®
       Effective January 1, 2004

       The IRS has passed regulations (2003-43) allowing for the reimbursement of eligible medical expenses using a debit card.
       Although this is very good news, the IRS was quite specific in their guidance on how claims must be substantiated when using
       a debit card. MGIS has prepared the following explanations and procedures on how to properly substantiate all Flexible
       Spending Plan (FSA) claims.
       Substantiation Requirements
       Effective January 1, 2004, MGIS will request documentation (itemized receipts, itemized bills, EOBs, etc.) for ALL expenses
       purchased with the debit card. IRS regulations state that TPAs can no longer use a sampling approach for claim adjudication.
       Therefore, MGIS must review every claim. Please inform your employees of the importance of retaining all receipts for
       expenses purchased with the debit card. Please also see our ‘Substantiation Solutions’ below.
       In the event that an employee improperly uses the card, the following steps will be taken to ensure that the plan remains
       compliant with IRS regulations:
        1. MGIS temporarily deactivates the card, and asks the employee to repay the plan for any ineligible charges.
        2. Should an employee submit additional claims, MGIS will use these claims (if eligible) to offset the money owed to the plan.
        3. If MGIS is unsuccessful in our attempts (3) to collect the funds, we will advise the Employer/Plan Sponsor to withhold the
            ineligible amount from the participant’s wages. Once this step has been taken, the participant’s card will be reactivated and
            their balance adjusted to account for the repayment.
        4. If MGIS is unsuccessful in requesting the repayment from a terminated employee, the employer must adjust the
            employee’s W2 statement to reflect the ineligible amount as taxable income.

                      Please note that IRS regulations clearly state that when the card is used improperly, and the
                             TPA completes their consistent process (listed above), the Employee is liable.

       Substantiation Solutions – Pharmacy Benefit Managers (PBMs)
       The IRS allows for auto adjudication of certain Flexible Spending Plan claims, which can eliminate or significantly reduce the
       documentation associated with substantiating an expense. Auto adjudication options include:
          Co-pay Matching: by providing your company’s schedule of benefits (during enrollment), MGIS can determine when an
          expense matches a specific copay amount.
          Identification of Recurring Expenses: MGIS can auto adjudicate expenses that recur for the same amount each month
          (i.e. maintenance prescriptions).
          PBM (Pharmacy Benefit Manager) Matching: If you are currently using a PBM with your group health plan, we also have
          the capability to use retro matching with any cooperating PBM. This will enable us to substantiate the eligibility of a
          prescription expense using a data feed from your PBM, rather than requesting documentation from the participant. If your
          group health plan uses a PBM, or your health insurer utilizes a PBM, see the attached listing of contracted PBMs.
          If your PBM is listed, or if you work with a PBM not listed, please contact Sharron Error (ext. 116) or Marsha
          Maresca (ext. 140) about utilizing your PBM for FSA administration.

       Reminder - Over-the-Counter Medications Eligible for Reimbursement!
       As you may be aware, the IRS passed a revenue ruling allowing for the reimbursement of over-the-counter drugs and
       medications. We feel that this ruling will increase employee FSA participation significantly. Your employees can use the debit
       card to purchase both prescription and over-the-counter medications! Please keep in mind that although the debit card is an
       excellent tool for payment of eligible medical expenses, all purchases made with or without the card must be substantiated in
       accordance with IRS regulations. For a complete listing of eligible expenses, please visit our website (www.We-R-

 Should you have any questions regarding your Flex Benefits plan, you may log on to our website or you may call 1-866-WE-R-FLEX
 (937-3539), (Dial 1) to speak with a customer service representative. We appreciate your continued support of the MGIS Flex Convenience card.

F-BB-05_101403                                                                                                Medical Group Insurance Services, Inc.