Self-Insured? Tax Season is Not Over Yet….Don’t Forget About PCORI!

As the popularity of self-insured group health plans (including partial or level self-funded plans) continues to grow with smaller and smaller companies it's important to note that the Patient Centered Outcomes Research Institute (PCORI) fee (tax), a product of the Affordable Care Act is still in effect.  For those employers who have fully-insured plans, the tax is built into your premiums collected by the insurer.  Those who have selected to self or partially self-fund their health plan(s), regardless of size, the PCORI tax will not be assessed for plan years ending after September 30, 2019, the last year for assessment is the 2018 calendar year. The remaining due dates for PCORI are July 31; 2017, 2018 and 2019.

Employers/plan sponsors subject to the fee should calculate and submit in accordance with the following; the amount of the PCORI tax is equal to the average number of lives covered during the policy or plan year multiplied by the applicable dollar amount for that year. For policy and plan year ending after…  

• Sept. 30, 2012, and before Oct. 1, 2013, that applicable dollar amount is $1.
•   Sept. 30, 2013, and before Oct.1, 2014, that applicable dollar amount is $2.
•   Sept. 30, 2014, and before Oct. 1, 2015, that applicable dollar amount is $2.08.
•   Sept. 30, 2015, and before Oct. 1, 2016 that amount is $2.17.
•   Oct. 1, 2016, through Oct. 1, 2017, it is $2.26.

 Applicable dollar amounts for 2018 can be further adjusted by the Secretary of Health and Human Services.

 All individuals who are covered, that is the number employees and dependents (count “belly buttons” not just “employees” or “insurance contacts”) during the policy year or plan year must be counted in computing the average number of lives covered for that year, unless the plan is a health reimbursement arrangement (HRA) or flexible spending arrangement (FSA).  COBRA covered lives and covered retirees are included in the calculation.

Use one of the following methods to determine the average number of lives covered under a plan for the plan year.

Actual Count: A plan sponsor determines the average number of lives covered (remember count “belly buttons”) under a plan for a plan year. Add the totals of lives covered for each day of the plan year and dividing that total by the total number of days in the plan year.

Snapshot: A plan sponsor counts the average number of lives covered under an applicable self-insured health plan for a plan year based on the total number of lives covered on one date (or more dates so long as an equal number of dates are used in each quarter) during the first, second or third month of each quarter, then divides that total by the number of dates on which the count(s) where made.

PCORI is filed using Form 720, (Quarterly Federal Excise Tax Return). Although Form 720 is a quarterly return, for PCORI purposes, Form 720 is filed annually only, by July 31 of the year following the last day of the plan year. For best results mark the last page of form 720 (the voucher), ‘2nd Quarter.’ This may help the IRS software not flag the return as “late or tardy.”

As a benefits advisor, Tycor’s is here to help.  For more information about this and other benefit advisory services we provide contact us at 610.251.0670.

 Joe Luscavage is Vice President of Employee Benefit Services for Tycor Benefit Administrators in Berwyn, PA. Tycor established in 1980 provided benefit advisory services to employers of all sizes in Pennsylvania. Give your second largest payroll expense the attention it deserves. Call Tycor today 610.251.0670.

Nothing in this article is intended to cover all requirements of compliance but acts as an overview of an employer’s responsibilities. Nothing Contained herein is intended to be legal or tax advice. Please consult your independent legal & tax advisors for questions specific to your plan or policy.