New Filing Requirement for Business Owners with Self-Insured Health Plans (such as HSA’s and FSA’s)

Hidden within the Affordable Care Act of 2010 is a new tax that many businesses are not aware of. In 2013, many employers were subject to the new Patient-Centered Outcomes Research Trust Fund Fee for the first time. Self-insured health plans, as well as issuers of some health insurance policies, are now required to report and pay the Patient-Centered Outcomes Research Institute (PCORI) fee. The PCORI fee, under tax code Section 4375 and 4376, was established by the Affordable Care Act to fund a nonprofit institute that will conduct comparative research on the benefits of medical treatments, services, procedures, and drugs. Last December, final regulations were issued regarding this fee by the Internal Revenue Service.

All employers who offer healthcare benefits to their employees will be subject to this new tax. If the plan is an insured plan (the employer pays monthly premiums to an insurance provider), the insurance company will calculate and pay the tax. If the plan is self-insured by the employer or is a Health Reimbursement Arrangement (HRA), or a Flexible Spending Account (FSA) offered through a cafeteria plan, the employer is responsible for calculating and paying the tax unless it qualifies as an exempt plan. Generally, an HRA is not exempt from these rules unless the HRA plan is connected to a self-insured health plan providing major medical benefits. In that case, the employer will only need to pay the tax with the self-insured plan. FSAs will only need to pay the tax if the employer does not offer a group health plan to employees or the plan provides for benefits more than two times any participant contribution to the plan.

The PCORI Fee is reported and paid using IRS Form 720 which is due on July 31. The IRS recently issued a revised Form 720 including specific sections on which to report this fee. The fee for policy and plan years ending on or after October 1, 2013, is $2.00, multiplied by the average number of lives covered under the policy or plan. The fee for policy and plan years ending before October 1, 2013, remains at $1.00, multiplied by the average number of lives covered under the policy or plan.

Further details for determining whether plans are subject to the fee, determining covered lives and other questions and answers from the IRS on the PCORI fee can be found here:

http://www.irs.gov/uac/Patient-Centered-Outcomes-Research-Trust-Fund-Fee:-Questions-and-Answers