Filed under: Tax Compliance & Planning

By Megan Ryan, CPA

Employers who maintain self-insured medical plans are subject to the Patient-Centered Outcomes Research Trust Fund Fee established under the Affordable Care Act (ACA). The fee will fund the Patient-Centered Outcomes Research Institute (PCORI). Some employers with self-insured medical plans must pay this fee for the first time on or before July 31, 2013. The fee will continue to be due on July 31st each year, currently expiring in 2020.

The plan sponsor is the party responsible for payment of the fee. In general, the employer that established the self-insured plan is the plan sponsor for purposes of the PCORI fee. Both taxable and tax exempt employers who are plan sponsors may be subject to the fee.

Employers are liable for the fee due on July 31, 2013 if the medical plan year ended after September 30, 2012.

The fee is applicable to the following types of plans:

  • Self-insured accident and health insurance plan or other major medical insurance plan
  • Self-insured retiree-only health or major medical insurance plan
  • Self-insured COBRA coverage
  • Self-insured Health Reimbursement Arrangement (HRA) plan, including premium-only HRAs
  • Flexible spending arrangements (only in limited circumstances, in particular where major medical coverage is not made available to employees)

The fee is equal to the number of covered lives during the policy year multiplied by $1 ($2 for the fee due next year on July 31, 2014). In subsequent years, the dollar amount will be adjusted for inflation. There are three different ways to determine the number of covered lives.

On June 3, 2013, the Internal Revenue Service released a revised Form 720, Quarterly Federal Excise Tax Return. Taxpayers who are required to pay the PCORI fee must do so by submitting Form 720 to the Internal Revenue Service. Payments of all federal excise taxes, including the PCORI fee, must be made through the Electronic Federal Tax Payment System (EFTPS).

More information will be forthcoming in our next Not-For Profit newsletter. Detailed information about the PCORI fee can be found here.

© Clark Nuber PS, 2013.  All Rights Reserved

This article or blog contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.