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.