Tax Alert: PCORI Fee Deadline July 31, 2014

The deadline for one of the Affordable Care Act’s (ACA) lesser known fees is Thursday, July 31, 2014. This fee was written into the ACA by Congress as a means of funding the Patient-Centered Outcomes Research Institute (PCORI), which performs medical research. Although not financially burdensome, the PCORI fee can cause compliance and filing headaches.

Who's affected?

The PCORI fee is imposed on issuers of certain health insurance policies and plan sponsors of self-insured health plans. Health insurance providers, individual employers and plan sponsors are responsible for the fee on their plans. The fee is imposed on plans with years ending after September 30, 2012, and it expires on October 1, 2019.

Any self-insured plan that provides accident and/or health coverage through any means other than an insurance policy and is established by an employer, employer organization or voluntary employees’ beneficiary association is subject to the fee. Organizations such as a multiple employer welfare arrangement are also subject.

How much will it cost me?

The fee for years ending before October 1, 2014, is $2 multiplied by the average number of lives covered under the policy for that policy year. The IRS has issued three methods for determining the number of lives covered for the plan year:

  • Actual count method – Adding the totals of lives covered each day of the plan year and dividing that total by the total number of days in the plan year
  • Snapshot method – Determining the average number based on the total number of lives covered on one date during the first, second and third month of each quarter and dividing that total by the number of dates on which a count was made
  • Form 5500 method – Determining the number based on the number of participants reported on the Form 5500 or Form 5500-SF

A number of deductions and exclusions apply. The PCORI fee does not apply to exempt governmental programs, including Medicare, Medicaid and other federally funded medical programs. Health insurance policies and self-insured plans that provide only excepted benefits are also exempt. Click here for a full chart from the IRS summarizing which types of insurance coverage or arrangements are subject to the PCORI fee.

How do I pay?

The PCORI fee is paid using Form 720, Quarterly Federal Excise Tax Return. It can be paid through the Electronic Federal Tax Payment System (EFTPS). It should be applied to the second quarter.

Still have questions?

More information can be found by contacting your insurance provider or by visiting the IRS website and the PCORI Q&A page