NU Online News Service, March 8, 2004, 4:11 p.m. EST – Evolution Benefits Inc., Avon, Conn., has taken a step toward eliminating paper from flexible spending account administration.[@@]

Evolution develops debit card-based account administration systems.

Drugstore.com Inc., Bellevue, Wash., a Web-based pharmacy, has agreed to transmit the data Evolution needs to determine whether over-the-counter drug purchases are eligible for FSA reimbursement and substantiate those decisions for the Internal Revenue Service.

The IRS has ruled that workers can use FSA funds to buy certain types of over-the-counter drugs, but FSA card holders have had to keep receipts to prove that they used their cards to buy eligible drugs, rather than lipstick or gum. FSA plan administrators had to review the receipts to verify that FSA holders were using their cards correctly.

Evolution has developed a system for screening batches of FSA card transaction data for substantiation purposes, but the new system will screen the purchases of FSA card holders as the holders are making the purchases, Evolution says.