An IRS Requirement Places New Burdens On Health Reimbursement Arrangements

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The Internal Revenue Service has published final regulations detailing how employers and insurers will calculate a new fee imposed under the Patient Protection and Affordable Care Act (PPACA). The Patient-Centered Outcomes Research Institute (PCORI) collected fee will help fund the private, nonprofit Institute that has been created to evaluate the quality and effectiveness of various medicines and treatments and to conduct comparative clinical effectiveness research.

PPACA requires health insurance issuers and sponsors (i.e. the employer) of self-insured health plans to pay fees to help finance the Institute’s research. These fees are widely known as PCORI fees, although they may also be called PCOR fees or comparative effectiveness research (CER) fees.

Payment of fee

The PCORI fee will need to be recorded on IRS Form 720, and must be paid by July 31st of the calendar year immediately following the last day of the plan year. Thus, an employer with a calendar year plan will pay its first PCORI fee by July 31, 2013.

  • Fee will be collected for seven years
  • Will affect those whose Plan years end between 2012-2019
  • Due each July 31st
  • Fee equal to the average number of Plan participants x $1.
  • PCORI multiplier will increase to $2 in 2014


Determination of PCORI fee requirement

What does this mean to you and your clients? In most cases, if you have a client who had a 105 Concepts HRA plan during the 2012 calendar year, that client will need to file a Form 720 and pay the corresponding PCORI fee by July 31st, 2013. The only exceptions to this would be plans that solely reimbursed “excepted” benefits (stand-alone dental or vision plans). All other plans would be subject to this requirement. The fee each client would need to pay would correspond to the average number of lives covered on the Plan each quarter. For most clients, there will be only one covered employee who is employed throughout the year, so the fee would be $1.

Need more answers?

Some of you may want assistance or guidance on this new requirement and fee calculation. For more information, on these issues, please call us at (630) 544-5340.

Very truly yours,

Dean R. Holland, CPA

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