PCOR Fee for HRA and FSA Plan Sponsors

Posted on May 22nd, 2013

The Patient Protection and Affordable Care Act (PPACA) of 2010 established the Patient-Centered Outcomes Research Institute (PCORI).  The goal of PCORI is to conduct research to provide information about the best available evidence to help patients and their health care providers make more informed decisions. PCORI’s research is intended to give patients a better understanding of the prevention, treatment and care options available, and the science that supports those options. This Institute will be funded by a PCOR fee, a new fee assessed on employers that goes into effect this year for most current insurance plans.  This fee may also be referred to as the Comparative Effectiveness Research Fee. 

The U.S. Internal Revenue Service issued a final rule on Fees on Health Insurance Policies and Self-Insured Plans for the Patient-Centered Outcomes Research Trust Fund, published in the Federal Register on Dec. 6, 2012.  

What plans are subject to the PCORI fees?

Self-insured health plans are subject to the PCORI fees. This includes the following self-insured health plans:
  • major medical plans;
  • prescription drug plans;
  • Self-insured dental or vision plans, if provided without a separate election or premium charge
  • HRAs and health FSAs that are not excepted benefits;
  • retiree-only plans;
  • EAPs, wellness programs, and disease management programs that provide “significant” medical benefits;
  • governmental plans (including plans sponsored by Indian tribal governments); and church plans.    

The following self-insured plans are not subject to the PCORI fees:
  • A plan that provides HIPAA-excepted benefits, such as certain limited-scope dental and vision plans, health FSAs that satisfy certain requirements, and certain supplemental coverage (but not including retiree-only plans);
  • An EAP, disease management program, or wellness program that does not provide significant medical benefits;
  • An exempt governmental program (including Medicare, Medicaid, CHIP, or federally established programs providing coverage to members of the military or members of certain Indian tribes); and
  • A plan covering primarily employees working and residing outside the United States.

Source: Miller Nash Attorneys at Law, Self-Insured Health Plans and PCORI Fees
An FSA is excepted from the fee if both of the following two conditions are met:
1. The employer’s contribution to the plan does not exceed the employee’s contribution and
2. The employer offers health insurance.
If an FSA and an HRA are offered with a fully funded insurance plan, you only have to count the employees toward the fee, not the covered dependents, when counting lives covered under the FSA and HRA.  If an employer has an FSA and an HRA that are non-excepted and have the same plan year, then plan sponsors only have to count an employee once, even if that employee is covered by both. Furthermore, if an employer has an FSA and HRA that are non-excepted and run on different plan years, then the plan sponsors will have to count the employees twice and pay the fee for each plan. 

Who is responsible for paying PCOR fees and how much are they? 

Under the IRS final rule, issuers and Sponsors of applicable self-insured plans are responsible for paying the fee.  A federal excise tax return reporting liability for the fee must be filed by July 31 of the calendar year immediately following the last day of the plan year.

As the issuer of specified health insurance policies, your carrier is responsible for filing Form 720 and paying the required PCORI fee in the case of fully insured coverage.  As the plan sponsor, self-funded customers must complete Form 720 (line 133) and pay the fee directly to the IRS. (Self-funded customers with questions about the filing of excise tax returns should consult with their tax advisor. You can read Form 720 instructions here.) 
The PCOR fee is a fee assessed per person, per plan, per plan year.   The fee is equal to the average number of covered lives for the policy year times the applicable dollar amount.
  • For policy years ending on or after Oct. 1, 2012, and before Oct. 1, 2013 - the applicable dollar amount is $1.
  • For policy years ending on or after Oct. 1, 2013, and before Oct. 1, 2014 - the applicable dollar amount is $2.
  • For policy years ending in any fiscal year beginning on or after Oct. 1, 2014 - the applicable dollar amount is the prior fiscal year's dollar amount plus an adjustment for medical inflation.
This fee has been determined an "ordinary and necessary business expenses" and is therefore deductible.  For more information read the IRS memorandum here.  

How is the PCOR Fee Calculated? 

There are three methods that employers and plan sponsors can use to count “covered lives”. They must use the same method across all their plans, but can change the method in subsequent years if they choose. The methods are:
1.  Actual Count Method – The average number of lives covered for each day of the plan year.
2.  Snapshot Method – The average number of lives covered for one day of each quarter. The day selected must be the same each quarter (Ex. The 20th day of the 1st month for each quarter).
3.  Form 5500 Method – Plans with Single/Employee Only coverage take a count at the beginning and end of the year and average them to calculate the fee. Plans with multiple tiers of coverage take a count and the beginning and end of the year and sum them to calculate the fee.
VantagePoint has chosen to use the Actual Count Method. During the month of June we will provide reports to our clients which can be used by your Accountant to complete the Form 720. 

When is payment of the fee due?

Groups with plan years ending between October 1, 2012 and December 31, 2012 must make their initial payment by July 31, 2013.  

Groups with plan years ending during 2013 will make payment on July 31, 2014.  
Please contact our office with questions.  
516-599-2120, Option 2

Posted in PPACA, HRA, FSA    Tagged with PCORI, PCOR fee, PCORI fee, PPACA


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