The Affordable Care Act imposes a Patient Centered Outcomes Research Institute (“PCORI”) fee on health plans in order to support clinical effectiveness research. The PCORI fee applies to plan years ending on or after October 1, 2012 and before October 1, 2019.
When is it due?
The fee is due by July 31 of the calendar year following the close of the plan year. For plan years ending in 2013, this means that the fee is due by July 31, 2014.
How do I calculate and report the fee?
The PCORI fees are required to be reported annually using Form 720, Quarterly Federal Excise Tax Return. According to the IRS, the PCORI fee is tax deductible as a business expense. The fee itself is assessed based upon the number of employees, spouses, and dependents that are covered by the plan. The fee is $1 per covered life for plan years ending before October 1, 2013 and $2 per covered life thereafter.
Which plans are subject to the fee?
Most health plans including major medical plans, prescription drug plans, and retiree only plans, are all subject to the PCORI fee. The fee applies to all types of employers including tax exempt organizations and governmental entities.
Who is responsible for the PCORI fee?
For insured plans, the insurance company is responsible for filing Form 720 and paying the PCORI fee. Therefore, employers whose group health plans are fully insured generally will not have any additional obligations with respect to the PCORI fee. In contrast, employers sponsoring self-funded health plans must file Form 720 and pay the corresponding PCORI fee.
For questions about the PCORI fee or assistance in calculating the fee, contact a member of the McGrath North Employee Benefits practice group.