Under the Patient Protection and Affordable Care Act (“Affordable Care Act”), employers that are plan sponsors of self-insured health plans with plan years ending on or after October 1, 2012 and before October 1, 2019 may be subject to Patient-Centered Outcome Research Institute (“PCORI”) fees, which must be reported and paid as federal excise taxes.
What is the PCORI?
The PCORI is a private, non-profit corporation established to assist patients and policy-makers in making informed health decisions by advancing the quality and relevance of evidence-based medicine. In order to fund the PCORI, the Affordable Care Act imposes fees on issuers of certain health insurance policies and plan sponsors of certain self-insured health plans. These fees are to be reported and paid as excise taxes on IRS Form 720. (See “Payment Methods and Due Dates” section below.)
How Much Are the Fees?
For plan years ending after September 30, 2012 and before October 1, 2013: Amount of fees = $1 x [Average number of lives covered during the plan year*]
For plan years ending after September 30, 2013 and before October 1, 2014: Amount of fees = $2 x [Average number of lives covered during the plan year*]
For plan years beginning on or after October 1, 2014 and before October 1, 2019: Amount of fees = [$2 adjusted for inflation] x [Average number of lives covered during the plan year*]
* Employees, dependents of employees, employees covered under COBRA and retired employees that are covered by the plan are includible in determining the average number of lives covered.
Payment Methods and Due Dates
The plan sponsor employer of a self-insured health plan must file IRS Form 720 (Quarterly Federal Excise Tax Return) to report and pay PCORI fees. Form 720 is due on July 31st of the year following the last day of the preceding plan year. Payment is due at the same time.
A plan sponsor employer who is required to pay the PCORI excise tax, but is not required to report any other liabilities on a Form 720, is required to file a Form 720 only once a year. Such employer is not required to file a Form 720 for each quarter.
Please Note: An employer with a self-insured health plan that had a plan year ending between October 1, 2012 and December 31, 2012, inclusive, was required to report and pay PCORI excise taxes by July 31, 2013. If you missed this deadline, please report and pay the taxes as soon as possible.
For further information regarding these matters, please contact Ms. Chon at 248.740.5689 or click here to send an email.