June, 2015 | RKL LLP
Posted on: June 25th, 2015

Annual PCORI Fee for Companies with Self-Insured Health Plans due July 31

Annual PCORI fee to due to IRS by July 31

Businesses with self-insured health plans may be required to pay the annual PCORI fee by July 31.

Does your business have a self-insured health and welfare plan? Does your health and welfare plan include a health reimbursement arrangement (HRA) or flexible spending account (FSA) option? If you answered “yes” to these questions, you may be required to pay the annual PCORI fee to the IRS by July 31.

What is the PCORI fee?

Both the PCORI fee and its namesake, the Patient-Centered Outcomes Research Institute, were established by the Patient Protection and Affordable Care Act of 2010. The Institute is a private, non-profit organization that works to improve the quality and relevance of evidence available to help patients, caregivers, clinicians, policy makers, employers and insurers make more informed health decisions. The PCORI fee is an annual excise tax reportable to the IRS on Form 720.

Which plan sponsors must pay?

The PCORI fee is imposed on the plan sponsor of an applicable self-insured health and welfare plan. Examples of plans subject to the fee include:

  • A plan established or maintained by the plan sponsor – usually the employer – for the benefit of the employees, former employees including retirees or other eligible individuals to provide accident and health coverage if any portion of the coverage is provided other than through an insurance policy.
  • Multiple self-insured plans established and maintained by the same plan sponsor with the same plan year. For example, a plan sponsor has one self-insured plan providing medical benefits and another providing prescription drug benefits with the same plan year. The two plans may be treated as one self-insured health plan for purposes of the fee.
  • A HRA plan that is integrated with another applicable self-insured health plan that provides major medical coverage. In this example, the HRA and major medical plan may be treated as one self-insured plan. Please note, a HRA integrated with an insured group health plan is also subject to the fee as an applicable self-insured health plan.

Who doesn’t pay?

The PCORI fee does not apply to:

  • HIPAA-excepted benefits, such as stand-alone dental and vision plans and on-site medical clinics
  • Accident-only coverage (including accidental death and dismemberment), disability income coverage and automobile medical payment coverage;
  • Workers’ compensation or similar coverage
  • Health savings accounts (HSAs) and Archer Medical Savings Accounts (MSAs)
  • Employee assistance plans, disease management programs, and wellness programs, to the extent they do not provide significant medical benefits
  • A plan that, as demonstrated by the facts and circumstances surrounding the adoption and operation of the plan, was designed specifically to cover primarily employees who are working and residing outside the U.S.
  • Stop-loss and indemnity reinsurance policies

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 plan 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.

What is the time frame?

The PCORI fee is reported on IRS Form 720, “Quarterly Federal Excise Tax Return,” by July 31 of the calendar year immediately following the last day of the plan year. For example, plans that ended on a date falling between January 1, 2014 and December 31, 2014, must submit Form 720 by July 31, 2015. There is no extension for time to file.

Not sure whether your company is required to pay the PCORI fee?

Have questions about the calculation of the fee? Contact your RKL tax advisor to ensure you’re in compliance.

Contributed by Laura Rineer, CPA, a supervisor in RKL’s Small Business Services Group. Laura specializes in helping small businesses from a wide variety of industries with financial statements, tax returns and related accounting and business needs. 

Working Capital blog disclaimer

Posted on: June 23rd, 2015

The Cheapest Way to Handle Fraud is to Prevent It. Here are 4 Ways to Start.

Consider these four tips to prevent fraud in your organization.

Consider these four tips to prevent fraud in your organization.

There’s no getting around it: every business is vulnerable to fraud. The Association of Certified Fraud Examiners (ACFE) reports that the typical organization loses five percent of revenues each year to fraudulent activity. Once business owners accept this reality, the question becomes: what can I do to reduce my risk? Here’s another fact: the cheapest way to handle fraud is to prevent it. Thankfully, there are some basic steps you can take to protect your company’s reputation and finances.

1. Understand your vulnerabilities.

The old adage holds true – knowledge is power. The foundation for any fraud prevention strategy is an understanding of your current risk level. A comprehensive review of your company’s fraud exposure risk is a good place to start. This analysis provides you with a thorough overview of your company’s risk factors and outlines what could go wrong, how adequate your current controls are and what you can do now to reduce your fraud risk. Once you know the lay of the land, you can move forward with fraud prevention strategies.

2. Watch the books – closely!

It may seem obvious, but business owners must be aware and knowledgeable about the financial transactions running through their company’s books. A hands-off approach from upper management creates a leadership vacuum in which fraud can thrive. Cross-train employees, implement dual controls, regularly review bank statement details and require supporting documentation be retained for each transaction. This extra level of checks and balances goes a long way to set the right tone at the top and let employees know that fraud will not be tolerated.

3. Make reporting easy and discreet.

According to ACFE, tips are consistently the most common fraud detection method – twice as high as the detection rates from manager or internal reviews. Establishing an anonymous tip line or online reporting option encourages employees to come forward without fear of backlash or retribution. As the saying goes, sunlight is the best disinfectant, so don’t overlook the culture of your company. Fostering a sense of transparency and openness helps empower your staff to bring up suspicions and concerns before they rise to a higher threat level.

4. Thoroughly vet potential employees.

Part of creating the positive culture described in tip #3 is to make sure individuals are a good fit before they are brought onboard as new employees. Beyond the standard employment verification process, background checks and drug tests can flag issues before hiring. This may seem onerous or invasive, but it pales in comparison to the damage that could be inflicted by hiring a troubled individual and giving them access to your company’s assets and confidential financial information!

These early precautions can help raise awareness of the risk for fraud and instill a zero-tolerance atmosphere for underhanded behaviors in the workplace. If you are looking for a partner to help your company fight fraud, look no further than RKL. Learn more about RKL’s fraud and forensic accounting services or contact Bethany A. Novis, CPA/ABV, CVA, CFE, at (717) 394-5666 or bnovis@rklcpa.com.

 

fraud forensic accounting lancaster paContributed by Bethany A. Novis, CPA/ABV, CVA, CFE, a partner in RKL’s Business Consulting Services Group and managing partner of RKL’s Lancaster office. Bethany specializes in fraud investigation, business valuation and litigation services. In addition to being a licensed CPA accredited in business valuation, she holds designations as a Certified Valuation Analyst (CVA) and a Certified Fraud Examiner (CFE).

 

 

Working Capital blog disclaimer

Posted on: June 5th, 2015

Local Investment Advisory Firm Again Named to CNBC “Top 100” List

PRESS RELEASE

LANCASTER, PA (June 5, 2015) – Kuntz Lesher Capital LLC (KLC), an independent investment advisory firm located in Lancaster, has been recognized again by CNBC as one of the nation’s “Top 100 Fee-Only Wealth Management Firms.” A wholly-owned subsidiary of Reinsel Kuntz Lesher LLP, KLC is the only Central Pennsylvania firm included in the “Top 100,” coming in at number 73.

CNBC ranked KLC and the other “Top 100” firms using its proprietary formula, which considers factors like assets under management; staff with professional designations (Certified Financial Planner or Chartered Financial Analysts); working with third-party professionals such as attorneys or CPAs; average account size; growth of assets; years in business; number of advisory clients; and providing advice on insurance solutions.

“This recognition shows that KLC can stand alongside firms from larger metropolitan areas and deliver high-quality investment advisory services right here in Central Pennsylvania,” said RKL CEO Edward W. Monborne. “We’re proud that KLC has been included in each of the past two years CNBC has been issuing this list, and we intend to build upon this success on behalf of our clients.”

KLC’s continued growth propelled it onto the “Top 100” list for the second straight year. For the last six years, KLC’s assets under management grew by an annual average of more than 21 percent. As of May 31, 2015, KLC has approximately $436 million of assets under management.

Founded in 1999, KLC is an independent registered investment advisor with a solid reputation for integrity, independence and a commitment to personalized client services. The firm is comprised of nine professionals, including a Certified Financial Planner, a Chartered Financial Analyst and a Certified Public Accountant. KLC has experienced growth in service areas such as investment management services, retirement plan consulting, wealth management programs and eldercare services. For more information, visit www.klcinvest.com.

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Posted on: June 2nd, 2015

FASB Issues Guidance to Simplify Presentation of Debt Issuance Costs

New FASB update simplifies the way debt issuance costs are recorded.

New FASB update simplifies the way debt issuance costs are recorded.

In an ongoing effort to reduce the complexity of accounting standards, the FASB issued guidance which will alter the way debt issuance costs are recorded. This update will require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, and no longer recording these costs as assets.

ASU No. 2015-03 (Subtopic 835-30): Interest – Imputation of Interest is effective for annual periods beginning after December 15, 2015. Early adoption is permitted.

Details of the ASU

The FASB received feedback that having different balance sheet presentation requirements for debt issuance costs and debt discounts and premiums creates unnecessary complexity in applying the accounting standards. The Board also concluded that capitalizing debt issuance costs is inconsistent with FASB Concepts Statement No. 6, Elements of Financial Statements, which defines an asset as something that provides a future economic benefit. Furthermore, the previous method where debt issuance costs were recorded as assets was inconsistent with guidance in the International Financial Reporting Standards (IFRS).

As a result, the FASB issued this update which will, in effect, reduce the face amount of the borrowing by the debt issuance costs associated with the borrowing. The recognition and measurement guidance for the debt issuance costs themselves is not affected by this update. The amortization of debt issuance costs will be recorded as interest expense over the life of the corresponding note.

Disclosure Considerations for Private Companies

This update was issued to provide simplification and consistency to worldwide accounting standards, which is an ongoing initiative of the FASB. The components of assets and liabilities will be affected by this guidance; however, there will be no impact to net assets. For financial statement disclosure purposes, the preparer must disclose the face amount of the note, either as a caption on the face of the balance sheet or in the notes to the financial statements. Additionally, the effective interest rate must be disclosed, which was previously a requirement, however, this rate will now increase due to the deduction from the face amount of the note for the related debt issuance costs.

In the year of transition, an entity should apply this guidance retrospectively to all periods presented in the financial statements. Additionally, an entity should disclose the following:

  • The nature of and reason for the change in accounting principle
  • The transition method
  • A description of the prior-period information that has been retrospectively adjusted
  • The effect of the change on the financial statement line item (that is, the debt issuance cost asset and debt liability)

Have questions about this guidance? RKL is here to help. Contact your RKL advisor or one of our local offices for details and assistance in assessing the impact of adoption.

audit standards debt issuance costsContributed by Michael P. Jones, CPA, a manager in RKL’s Audit Services Group. Mike specializes in serving the audit and accounting needs of commercial and not-for-profit organizations.

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