2017 PCORI Fee – Plans ending in 2016
The Patient-Centered Outcomes Research Institute (PCORI) fee was placed into effect for all specified health insurance policies ending between September 30, 2012 and October 1, 2019. Under provisions of the Affordable Care Act (ACA), the PCORI fee was designed to increase funds derived from issuers of specified health insurance polies as well as planned sponsors of self-insured health plans.
Which self-insured plans qualify to pay the fee?
For organizations in which participate in a qualifying health plan, ending within the 2016 calendar year, it is important to know these fees are due to the IRS by July 31, 2017. Not all plans are considered self-insured plans, thus not all plans qualify to pay the PCORI fee. All self-insured medical plans, such as FSAs and HRAs (HSA is general not deemed self-insured and therefore, does not qualify to pay the fee), are required to pay the fee unless the plan contains one of the following disqualifying conditions: the plan covers employees in which reside/work outside of the US, or the plan is deemed as an excepted benefit. FSA and HRA plans can be considered excepted benefit plans, exempting the plan from the PCORI fee, under the following conditions:
- Flexible Spending Account (FSA) – Over the course of the year the employer does not contribute more than $500 into the accounts as well as offers an additional medical plan with non-expected benefits.
- Health Reimbursement Arrangement (HRA) – The plan only reimburses for excepted-benefits and is not integrated with group medical policies.
How to pay the PCORI Fee
If the medical plan is insured, the insurance carrier is the party deemed responsible to pay the PCORI fee on behalf of the policyholder. However, for all self-insurance plans the party deemed responsible to pay the PCORI fee must file IRS Form 720 and pay the fee to the IRS directly. Form 720 must be completed by employers for the second quarter. The form and PCORI fee are due to the IRS on July 31 of the proceeding calendar year after the last day of the plan year end. Therefore, for all plans ending in the 2016 calendar year, the Form 720 is due to the IRS by July 31, 2017.
Calculating your contribution to the PCORI Fee
The PCORI Fee’s basis for calculation is derived by calculating the average number of lives covered during the policy year. This basis is then multiplied by a predetermined covered life fee, Exhibit A. Both participating employees as well as their dependents included as covered lives. Specifically, for HRA and FSA plans, only include participating employees as a covered life. To calculate the Average Number of Lives Covered under the plan the IRS instructions for Form 720 provide three methods:
- Actual Count Method: Aggregated total number of covered lives (participating employees and dependents, if HRA or FSA only participating employees), per selected date, divided by the total number of covered days in the plan year.
- Snapshot Method: At least one day within each month per quarter. The date used per quarter must be within 3 days (dates) of the corresponding quarters.
- Snapshot actual method: Aggregated total number of covered lives (participating employees and dependents, if HRA or FSA only participating employees) per selected date, divided by number of days used.
- Snapshot factor method: Number of participants with self-only coverage plus 2.35 times the number of participants with self-only and additional coverage. (Note: this method cannot be used for HRA or FSA plans)
- Form 5500 Method: Use form 5500 to derive the total participant account per covered year
- Self-only Coverage: Derive the summation of total participants at the start and year end of the covered plan year, then divide by 2 to arrive at the average total participants for the year.
- Self-only and dependent coverage: Derive the summation of total participants at the start and year end of the covered plan year. (Note: this method cannot be used for HRA or FSA plans)
Exhibit A: 2016 plan year end and associate fee per covered life
2016 plan year ending Fee per Covered Life, $
Feb 1, 2015 – Jan 31, 2016 2.17
Mar 1, 2015 – Feb 28, 2016 2.17
Apr 1, 2015 – Mar 31, 2016 2.17
May 1, 2015 – Apr 30, 2016 2.17
Jun 1, 2015 – May 31, 2016 2.17
July 1, 2015 – Jun 30, 2016 2.17
Aug 1, 2015 – July 31, 2016 2.17
Sept 1, 2015 – Aug 31, 2016 2.17
Oct 1, 2015 – Sept 30, 2016 2.17
Nov 1, 2015 – Oct 31, 2016 2.26
Dec 1, 2015 – Nov 30, 2016 2.26
Jan 1, 2016 – Dec 31, 2016 2.26
Article updated by Craig Mengel. For additional information please contact Craig at [email protected]