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June 07 2013
Additional Guidance for PCORI Fees Due July 31, 2013

Who Pays the Fee

Under the IRS final rule, issuers and plan sponsors are responsible for paying the PCORI fee, which is treated like an excise tax by the IRS.  For fully insured plans your insurance company will pay the fee for you.  With other plans sponsored by employers including self funded plans and health reimbursement arrangements you may be responsible to file the fee directly with the IRS.  Please review plans or policies impacted.   (Self-funded customers with questions about the filing of excise tax returns should consult with their tax advisor.)

Plans or Policies Impacted

The fee applies to certain "specified health insurance" policies and includes medical policies, retiree-only policies, any accident or health insurance policy (including a policy under a group health benefit plan) issued to individuals residing in the United States. This does not include:

  • "Excepted benefits," as defined under HIPAA, such as stand-alone vision or dental plans
  • Employee Assistance Programs (EAP) or wellness programs
  • FSA plans, when they meet the excepted benefits test
  • HRA, when it meets the excepted benefits test
  • Expatriate coverage (those working outside the United States and their spouses and dependents)
  • Stop loss, where the issuer is liable for all losses in excess of a specified amount and where the plan sponsor retains its liability for losses
  • Indemnity reinsurance policies, where the reinsuring company accepts all or part of the risk of loss under the policy and the issuing company retains its liability for covered lives
  • Medicare
  • Medicaid
  • CHIP
  • Non-insurance health programs for members (spouses or dependents) of the Armed Forces or veterans
  • Federally recognized Indian Health Services and programs under the Indian Health Care Improvement Act

Special Update: The IRS has revised Form 720,
Quarterly Federal Excise Tax Return, for employers sponsoring certain self-insured health plans to report and pay new fees imposed under Health Care Reform to fund the Patient-Centered Outcomes Research Institute ("PCORI"). The fees, which must be reported annually on the second quarter Form 720 and paid by its due date, July 31st, are based on the average number of lives covered under a plan. 

Affected Self-Insured Plans
PCORI fees are imposed on plan sponsors of applicable self-insured health plans for each plan year ending on or after October 1, 2012, and before October 1, 2019. An applicable self-insured health plan generally includes a health reimbursement arrangement (HRA), as well as a health flexible spending arrangement (FSA) that is not treated as an excepted benefit.

Calculating the Fee
The fee for an employer sponsoring an applicable self-insured plan is two dollars (one dollar for plan years ending
before October 1, 2013) multiplied by the average number of lives covered under the plan. For plan years ending on or after October 1, 2014, the fee will increase based on increases in the projected per capita amount of National Health Expenditures.

Details on how to determine the average number of lives covered under a plan, as well as various examples, are included in the final regulations. For a plan year beginning before July 11, 2012, and ending on or after October 1, 2012, an employer is allowed to use any reasonable method to determine the average number of lives covered under the plan.

How to Report and Pay the Fee
Form 720 must be filed annually to report and pay the fee no later than July 31st of the calendar year immediately following the last day of the plan year to which the fee applies. According to the revised Instructions for Form 720, employers who file the form only to report PCORI fees are not required to file the form in other quarters, unless other fees or taxes must be

Deposits are not required for this fee, so employers do not need to use the Electronic Federal Tax Payment System. Form 720-V (scroll to page 7) is used for making a payment by check or money order with Form 720.

Note that the regulations do not permit or include rules for third-party
reporting or payment of the PCORI fee.


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