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 prior 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. The fee for the 2022 plan year is $2.79 per covered life for plan years ending between January 1, 2021 and September 30, 2022. For plan years ending between October 1, 2022 and December 31, 2022, the PCORI fee is $3.00.
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.)
Examples
Example #1
Group has a renewal date of May 1st. The group is fully insured (carrier pays fee) but moves to a self-insured plan (group pays fee) effective May 1st, 2022.
When does the group have to start paying the fee – is it by July 31, 2023 or July 31, 2024?
The fee must be submitted the July following for the portion of the plan year in which they were self-funded. July 2023 for May 1, 2022 – Sept. 30, 2022 at $2.79; Oct. 2022-Dec. 2022 at $3.00.
Example #2
Group has a renewal date of September 1st. The group is fully insured (carrier pays fee) and goes to a self-insured plan (group pays fee) effective September 1, 2022.
When does the group have to start paying the fee – is it by July 31, 2023, or July 31, 2024?
The fee must be paid the July 31st following the prior calendar year. For off-calendar year plans, the reporting will remain the same, however, fees may be split depending on the months. For example, a plan year that ends January, February, March, April, May, June, July, August or September 30, 2022, the fee is $2.79 per “covered life” and for a plan year that ended October, November or December 2022, the fee is $3.00 per “covered life”.
Example #3
Group has a renewal date of September 1st and sets up a Health Reimbursement Arrangement (HRA) effective November 1, 2022. (Medical carrier pays the fee but group will need to pay fee for HRA).
When does the group have to start paying the fee for the HRA – is it by July 31, 2023, or July 31, 2024?
The PCORI fee is due July 31, 2023, for November and December at a rate of $3.00 per life. Remember, if the HRA is integrated with the self-funded plan a separate fee is not required to be paid by the employer plan sponsor. An HRA is required to pay the PCORI fee if it is a stand-alone HRA or is integrated with an insured major medical plan (the carrier pays the PCORI fee for the underlying insured plan). However, an HRA is not required to pay the PCORI fee for individuals who are covered under both the HRA and a self-insured major medical group health plan with the same plan year.
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.