The PCORI fee is paid on August 1 for self-insured health plans

At the end of last year, the IRS raised the annual fee paid by policyholders or health plan sponsors to fund the Federal Patient-Centered Research Institute (PCORI) Trust Fund. The new fee is $ 2.79 per person covered, with the other rates described below.

The fee is normally due on July 31st each year, but for 2022, the fee will be paid on August 1st, as July 31st is on Sunday this year.

The rate applies to previous year’s calendar health plans. According to IRS 2022-04, annual fee adjustments include:

  • They were completed on October 1, 2021 and October 1, 2022 for the plan years (including annual plans), is the fee
    $ 2.79 $ 2.66 for each year covered by the plan — employees and dependents.
  • For the plan years ended on October 1, 2020 and October 1, 2021, is the quota
    $ 2.66 per person, more than $ 2.54 in the previous year.

However, as of March 4, 2022, we have updated the IRS Questions on PCORI Fees:

  • From 20 September 2021 and before 1 October 2022, the applicable dollar amount is $ 2.79.
  • From 30 September 2020 and before 1 October 2021, the applicable dollar amount is $ 2.66.

Self-insured employers pay the annual PCORI fee directly to the IRS. For fully insured employers, the fee is paid by the insurance provider, although the cost may be taken into account in premium increases.

Fees are reported and paid annually by filing IRS Form 720 (Federal Quarterly Tax Return) and paid by July 31 of the year following the end of the plan year, except on a weekend or federal holiday.

The fee will apply until 2029

The Affordable Care Act created a fee to fund a Washington DC institute that conducts research on the comparative effectiveness of medical treatments. The fee was only applicable to plans that ended September 30, 2012 and ended before October 1, 2019. However, under the 2019 Bilateral Budget Act, the annual PCORI presentation and fees were extended by a further 10. years, until 2029.

“The PCORI fee is calculated using the average life of the policy or plan and the dollar amount applicable to that policy year or plan year,” said William Sweetnam, legislative and technical director of the Washington Flexible Employers ’Compensation Board. , DC “The applicable dollar amount was $ 2 when the fee was established under the Affordable Care Act, and that amount is increased annually based on projected increases in the amount of per capita national health expenditures.”

Calculating PCORI rates

The IRS offers self-insured employers the opportunity to determine the average number of people enrolled in the plan, which the IRS calls as life-covered: health plan-covered employees, spouses, and dependents. According to the IRS, plan sponsors may use one of the following methods to calculate the average life expectancy of the plan:

  • Actual counting method. Plan sponsors add the total life covered for each day of the year, divided by the number of days in the plan year.
  • Snapshot method. Sponsors add the full life covered by the plan to a date for each quarter of the year.
  • Snapshot factor method. Similar to the Saturday method, the number of lives covered on any given day can be counted by counting the number of lives covered on that day or by treating only those who have coverage as a single life and those with coverage other than themselves. 2.35 as life.
  • Form 5500 method. Plan sponsors use a formula that includes the number of participants reported on Form 5500 for the annual plan.

The IRS published a table showing the application of PCORI quotas in common types of health coverage.

FSA, HRA and other benefits

Generally, flexible health care (FSA) accounts are considered an exceptional benefit and therefore do not require the payment of the Form 720 and PCORI dues “unless the employer — and not just the employee — makes a contribution of less than $ 500 or less per year.” Equal to employee contribution dollars, ”said Gary Kushner, president and CEO of Kushner & Company, a HR strategy and employee benefits consulting firm in Portage, Mich. “In this event, these FSAs must also be included in the application. Form 720” with the appropriate payment for each tuition.

For health return arrangements (HRAs), employers “should first look at an integrated group health plan,” Kushner recommended. “It simply came to our notice then [health] the plan is fully insured, then the employer must submit 720 “and pay each employee’s fee with an employer-funded HRA. The fee is paid per employee, and the fully insured health plan does not include spouses and children. fee calculation.

“However, if the underlying group health plan is self-funded, then there is no need to submit a separate 720 for an integrated HRA, but rather a self-funded group health plan form and a fee,” Kushner said. In this case, the fee is calculated based on the life covered, not the staff.

Although the insurer is responsible for paying the PCORI fee for the fully insured medical plan, “the employer is responsible for paying the PCORI fee to the HRA,” wrote Karen Hooper, Newfront’s vice president and chief executive officer, chief of insurance and finance. service company in San Francisco. “The IRS essentially doubles the PCORI fee in this scenario by setting the same lives covered by primary care physicians and HRAs. In doing so, the HRA PCORI fee paid by the employer is determined by counting only one life.

The PCORI fee does not apply to participants in a health savings account (HSA) because HSAs are individual accounts, not group health plans.

The fee also “does not apply to dental and vision coverage that is an exceptional benefit (through an autonomous insurance policy or” non-comprehensive “coverage of the self-insured test),” Hooper explained, and “almost dental and all vision, vision plans are exceptional benefits “.

Missed payment deadlines

“The employer who immediately discloses the notice and payment of the PCORI fee on time, upon completion of the supervision, should file Form 720 and pay the fee (or submit a corrected Form 720 to notify and pay the fee if the employer submits the form on time for other reasons, but he refused to report and pay the PCORI fee), ”advised Ethan McWilliams, a senior broker and performance analyst at Lockton, Kansas City (Mo).

Employers in this situation need to make sure that they use the form for the appropriate tax year.

“The IRS may charge interest and penalties for late filing and payment, but for good reason, it has the power to waive penalties,” he said.

Future Fees

The amount of the PCORI fee is adjusted annually to reflect national health spending inflation, as determined by the Secretary of Health and Human Services (HHS).

“That’s why [HHS] did not publish the updated National Health Expenditure Chart for 2021, this year’s fees are based on forecasts set out in the 2020 charts, ”Fraser Trebilcock, a law firm in Lansing, Michigan, said in a statement from clients. attention to next year’s quota changes, ”which could reflect several years of health inflation.

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