Plan sponsors of self-funded plans, including some Health Reimbursement Arrangements (HRA) and Flexible Spending Accounts (FSA), are reminded that the Affordable Care Act’s (ACA) Patient Centered Outcomes Research Institute Fee (PCORI) is due for calendar year plans by July 31st. In December of 2019, the PCORI fee was resurrected for another ten years (see the Leavitt Group article.)
Self-funded plan sponsors are responsible for submitting Form 720 and any corresponding fees. The Internal Revenue Service (IRS) publishes the due dates and applicable rates here. NEWS! The (yet-to-be shown on the IRS webpage) new rate for the 2020 plan year is $2.54 per covered life according to the newly released IRS Notice 2020-44.
Plan Year Ending: October 2019- September 2019
Fee Per Covered Life: $2.45
New 2020 Plan Year Rate: Ending on or after October 1, 2019 ending before October 1, 2020 is $2.54.
Transition relief has also been provided since plan sponsors anticipated the termination of the fee when calculating the average number of covered lives in determining your applicable fee for plans years ending on or after October 1, 2019 and before October 1, 2020. While the usual count methods may be used, additionally, this relief permits use of “any reasonable method” to calculate the average number of covered lives for the plan year so long as that method is used consistently for the duration of the year, for all Form 720 excise tax liabilities that year.
What if the fee is late or was not remitted?
Late fees apply for late filing and/or payment, but the IRS may waive these if the plan sponsor has reasonable cause and the failure was not due to willful neglect. However, the IRS will not waive fees if the failure was due to inadvertent error. See Part II (Pages 8-9) of the IRS instructions. Corrections to a previously-filed Form 720 filing may be made using Form 720X. (See Q/A 16 on the IRS PCORI Fee webpage cited above.)
Action May be Required
Self-funded plan sponsors are obligated to make this payment, not their carrier or Third Party Administrator (TPA). Consult your legal and tax professional for calculations and to ensure compliance with all applicable law for your specific circumstances. For additional details on calculating covered lives and remitting payment, see the Leavitt Group article.
The Leavitt Group is not a law firm. This information is intended as educational only and may be oversimplified for ease of consumption. Be sure to consult with your own legal, tax or financial professional to ensure compliance with all applicable law.