Is your health plan self-insured? Does your health plan have an HRA and/or an FSA?
If so, you may be required to pay a new excise tax and complete Form 720 with the IRS by July 31, 2013 as part of new rules under the Patient Protection and Affordable Care Act of 2010. If your health and welfare plan service provider hasn’t been in contact with you about the fee, here’s what you need to know.
What is the PCORI fee?
This new fee was established to fund the Patient-Centered Outcomes Research Institute (PCORI). The Institute is a private, non-profit organization that researches, compiles and distributes comparative clinical effectiveness findings to assist patients, clinicians, purchasers and policy-makers in making informed health decisions.
Who does the fee apply to?
- Companies with self-insured plans
- Companies with HRAs and/or FSAs
How much do I pay?
The fee is equal to the average number of lives covered during the plan year multiplied by the applicable dollar amount for the year. One of three methods can be used to determine the average number of covered lives – the actual count method, the snapshot method and the Form 5500 method.
The applicable dollar amount for plan years ending on or after October 1, 2012 and before October 1, 2013, is $1. For plan years ending on or after October 1, 2013 and before October 1, 2014, the applicable dollar amount is $2. For plan years ending after October 2014, the applicable dollar amount is the prior fiscal year’s dollar amount plus an adjustment for inflation.
What’s the timing of the fee?
- The fee applies to plans years ending on or after October 1, 2012 and before October 2, 2019
- Form 720 and your payment must be filed annually by businesses with self-insured health plans by July 31 of the year immediately following the last day of the plan year
- The first filings of the fee are due July 31, 2013
What should I do next?
First, contact your health and welfare plan service provider for help in determining the impact this excise tax may have on your business and for help in calculating the average number of lives covered and the fee. If you need assistance preparing and filing Form 720, contact your RKL advisor.
Please note: This is only a summary of the PCORI fee imposed on plan sponsors of applicable self-insured plans and should not be relied upon to determine the applicability of the fee for your business or to calculate the fee.
Contributed by Laura Rineer, CPA
Laura Rineer is a CPA and supervisor in RKL’s Small Business Services Group. She brings more than nine years in public accounting to RKL. Laura specializes in helping small businesses from a wide variety of industries with financial statements, tax returns and related accounting and business needs.