The Affordable Care Act imposes a fee on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to help fund the Patient-Centered Outcomes Research Institute. The fee, required to be reported only once a year on the second quarter Form 720 and paid by its due date, July 31, is based on the average number of lives covered under the policy or plan.
What Plans Are Subject to the Comparative Evidence “PCORI” Fee?
Plans subject to the fee:
- Medical plans.
- Prescription drug plans.
- Self-insured dental or vision plans, if provided without a separate election or premium charge.
- Health reimbursement arrangements (HRAs).
- Retiree-only health plans (even though some are exempt from other PPACA mandates).
Plans exempt from the fee:
- Separately insured dental or vision plans.
- Self-insured dental or vision plans, if subject to separate coverage elections and employee contributions.
- Expatriate coverage provided primarily for employees who work and reside outside of the U.S.
- Health savings accounts (HSAs).
- Most flexible spending accounts (FSAs).
- Employee assistance programs (EAPs), wellness programs and disease management programs that do not provide “significant benefits in the nature of medical care or treatment.”
If you have a HRA or you have a Patient Centered Outcomes Research Institute (PCORI) fee which is due by July 31. The fee is either $1 or $2 per employee for the average number of employees in the prior year. If you are part of a fully insured plan then your insurance company will pay the fee on your behalf. Please note that fully insured plans will have the fee paid by the insurance company.
You will use IRS Form 720 to report and pay your PCORI fee. Although Form 720 is designed for quarterly payments of certain excise taxes, the PCORI fee is paid only annually.
Do you owe $1 or $2 per average employee?
You owe $1 if your plan began Jan. 1, 2012 through Sept. 1, 2012
You owe $2 if your plan began Oct. 1, 2012 through December 1, 2012
What you need to do:
- Open Form 720 and the instructions to complete your general information.
- In “Quarter Ending” section: June 2014
- Write your average number of employees (from your billing statement) in Part II on the form, on the lines marked “IRS No. 133” Employers should only use the line for “applicable self-insured health plans.” You will need to multiply your average number by either $1 or $2 (See previous section of this letter to determine which applies to you) and enter in box (c) on the same line.
- Fill out “Total” amount at bottom of Part II.
- Sign the bottom of page 2 of Form 720.
- Mail the Form 720 and payment to:
Department of the Treasury Internal Revenue Service
Cincinnati, OH 45999-0009
The Form 720 is a quarterly federal excise tax form that is used to report and pay quarterly excise taxes on all sorts of things that have nothing to do with group health plans. You can otherwise ignore the rest of this Form. The Form 720 is filed annually to report and pay the PCORI fee no later than July 31 of the calendar year immediately following the last day of the policy year or plan year to which the fee applies.
