PCORI Fees Guide for Employers With Self-Funded HRA Plans

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PCORI Fees

BASIC is offering this alert about upcoming fees that apply to self-funded HRA Plans. As you may have heard, the fees payable by health insurers and self-funded plan sponsors to fund the Patient-Centered Outcomes Research Institute (PCORI) were extended on December 20, 2019, as part of the Further Consolidated Appropriations Act of 2020. Plans subject to the fee include:

  • Health reimbursement arrangements (HRAs)
  • Medical plans
  • Prescription drug plans
  • Self-insured dental or vision plans, if provided without a separate election or premium charge
  • Retiree only health plans (even though some are exempt from other PPACA mandates)

The fees are always due July 31 following the end of your plan year. Example: If your plan ends in 2019, your fees would be due July 31, 2020. The fee is multiplied by the average number of lives covered under the plan/policy. The fees are as follows:

  • Plan Years Ending between:  January 1, 2019 through September 30, 2019 = $2.45 per covered life
  • Plan Years Ending between:  October 1, 2019 through December 31, 2019 = $2.54 per covered life

You are responsible for handling the filing and payment of the fees. BASIC is not permitted to file on your behalf.

Calculating the “Average Number of Lives Covered”

BASIC can help you calculate the number of lives that you must report. Please reach out to our customer service center to request the number of lives on your plan. There are three ways to calculate the number of lives:

  • Actual Count Method: The sum of lives covered for each day of the plan year, divided by the number of days in the plan year
  • Snapshot Method: In general, the sum of the total of lives covered on a date during the first, second or third month of each quarter of the plan year divided by the number of dates on which a count was made
  • Form 5500 Method (recommended): The number of participants reported on the Form 5500 (the number of participants covered on the HRA plan on the first day of the plan year)

For health FSA and HRA coverage that is not disregarded under the rule for multiple self-insured arrangements (or because it offers only excepted benefits, like dental & vision only or retiree plans), each participant can be treated as a single life, regardless of how many other individuals (e.g., spouse, dependents) are actually covered. This means a plan sponsor is not required to include dependents as “lives” under these plans – instead they are only required to count the employee.

Payment of PCORI Fees – IRS Form 720

Plan sponsors with calendar-year plans must remit the PCORI fees applicable for the 2019 plan year by July 31, 2020. The Regulations indicate that the reporting and payment of PCORI fees may not be delegated to a third party (such as BASIC). The fees should be reported on Form 720 (Quarterly Federal Excise Tax Return Form).

Here is the link directly to the form: http://www.irs.gov/pub/irs-pdf/f720.pdf and instructions for Form 720: https://www.irs.gov/pub/irs-pdf/i720.pdf

The address to send the Form 720 and payment is:

Department of Treasury

Internal Revenue Service

Ogden, UT  84201-0009

Tax Deductibility of Fees

The IRS stated that fees paid by issuers of certain health insurance policies and plan sponsors of certain self-insured health plans to fund the Patient Centered Outcomes Research Trust Fund (PCOR) were ordinary and necessary business expenses, and thus, deductible business expenses. Please see the memorandum issued here:
http://www.irs.gov/pub/irs-utl/AM2013-002.pdf

Additional PCORI References

http://www.irs.gov/uac/Newsroom/Patient-Centered-Outcomes-Research-Institute-Fee

BASIC Health Reimbursement Arrangement (HRA)

BASIC HRA is a powerful tool to combat rising healthcare costs. Employees spending money from an HRA tend to consider their health care purchases more carefully, rewarding both the employer in reduced HRA reimbursements and the employee in less out-of-pocket costs. Employers have complete flexibility to offer various combinations of benefits in designing their plan, including full integration with BASIC FSA. Whether establishing a new plan or taking over administration of an existing plan we conduct a thorough review to help you avoid implementing or coninuing a plan that is cumbersome, or worse, discriminatory.

Reqeust a proposal for HRA Administration today!

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