Reminder: Patient Centered Outcomes Research Institute Fees due July 31

As a reminder, Patient-Centered Outcomes Research Institute (“PCORI”) fees are due July 31, 2014 for all organizations with a self-insured health plan.
The PCORI fee is treated like a tax, and is required to be paid annually on Form 720, “Quarterly Federal Excise Tax Return,” by July 31 of the calendar year, immediately following the last day of the applicable plan or policy year. If your plan or policy year ends on December 31, 2013, the fee and filing are due no later than July 31, 2014. If the plan is insured, the insurance company will pay the fee. If the plan is self-funded, the employer is responsible. Nonprofits are not exempt from the PCORI fee.
How and When to Pay the Fee  
For self-funded plans, the plan sponsor is responsible to pay the fee. For insured plans, the carrier is the responsible party to pay the fees. The plan sponsors are not required to take any action.
The PCORI is imposed on the plan sponsor and not the plan itself – therefore the fee must be paid by the plan sponsor and not from the plan assets. The PCORI fee is the employer’s obligation. The PCORI is, however, a tax-deductible expense to the employer.
The fee began in 2012 and phases out in 2019. The amount of the PCORI fee is equal to the average number of lives covered during the policy year or plan year multiplied by the applicable dollar amount for the year.

• For policy and plan years ending after September 30, 2012, and before October 1, 2013, the applicable dollar amount is $1.
• For policy and plan years ending after September 30, 2013, and before October1, 2014, the applicable dollar amount is $2.
• For policy and plan years beginning on or after October 1, 2014, and before October 1, 2019, the applicable dollar amount is indexed to inflation.

The fee does not apply to the following plans or policies: 

• “Excepted benefits,” as defined under HIPAA, such as stand-alone vision or dental plans;
• Health FSA plans which meet the excepted benefits test;
• An HRA that is bundled with a self-insured major medical plan (an HRA that is bundled with a separate fully insured major medical plan is subject to the fee);
• Health Savings Accounts;
• Government programs such as Medicare or Medicaid

Number of “Covered Lives” 
Self-funded plans may determine the average number of covered lives by using any of three methods. Plan sponsors must use the same method consistently for the duration of any year and the same method for all policies subject to the fee.

• Actual Count: Count the total covered lives for each day of the plan year and divide by the number of days in the plan year.
• Snapshot Method: Add the total number of lives covered on one or more dates in each quarter, and divide by the total number of dates on which the count was made.
• Form 5500 Method:
  • For self-only coverage add the number of plan participants reported on the 5500 at the beginning and end of the plan year and divide by two.
  • For plans with self-only and other coverage add the number of plan participants reported on the 5500 at the beginning and end of the plan year.

Employers must pay the PCORI fee by filing IRS Form 720 by July 31. Although this form is for quarterly federal excise tax returns, employers need to report and pay PCORI fees only annually. This form can be found at http://www.irs.gov/pub/irs-pdf/f720.pdf.
For more information, please contact your AAFCPAs Partner, or Joshua England, Esq., Tax Strategist, at 774.512.4109 or jengland@aafcpa.com.