Federal health care reform law added a new fee on health insurance carriers and self-funded plans to fund clinical effectiveness research. The function gives the fee its name (sometimes referred to as “CER fees” or “PCORI assessment”). Although both carriers and self-funded plan sponsors must pay these fees -- even when a carrier pays the fee, the new costs will ultimately be passed along in premiums for an insured group health plan.
All plans should have now gone through at least one payment cycle. However, a refresher on who must pay the fee, the amount of the fee, and how the fee is reported is always welcome. Available on the IRS website are questions and answers relating to the payment of the PCOR fees. (See links below.)
Applicable Fee and Cycle
CER/PCORI fees are due by July 31, 2015 for 2014 calendar plan years and for plan years ending on or after October 1, 2013 and before September 30, 2014.
- For 2014 calendar plan years, employers must pay a $2.08 per covered life fee by July 31, 2015. This is an increase of 8 cents over the 2013 calendar year plan.
- For plans ending on or after October 1, 2013 and before September 30, 2014, employers must pay a $2 per covered life fee by July 31, 2015. [As a reminder, plan sponsors that have a plan that ends on or after October 1 and before September 30 will see the 8 cent increase on their next filing due in 2016.]
IRS Form 720
Plan fees must be paid via IRS Form 720 Quarterly Federal Excise Tax Return, which the IRS recently updated (See link below). Since this fee is only reported annually, a plan sponsor will report the pay the fee on the second quarter Form 720.
Is the CER/PCORI Fee Permanent?
The PCORI fee is not intended to be permanent. Under current law the fee is effective for plan years ending after September 30, 2012, and before October 1, 2019. Of course, Congress holds the authority to extend the fee cycle by enacting new legislation to do so.
Excepted Benefits Are Not Subject
The fees do not apply if substantially all of the coverage is composed of “excepted benefits” as defined by regulation. Excepted benefits refers to a specific category of limited benefits including, among others, most health FSAs, and many dental and vision programs when they satisfy certain conditions and most supplemental coverage. (To the extent possible, plan sponsors may wish to consider structuring benefits to qualify as excepted benefits—to mitigate fees.)
Retiree-Only Plans Are Subject
Although retiree-only plans are not required to comply with certain health care reform provisions, the applicable exception for CER/PCORI fees does not apply and therefore such plans are generally subject to the fee (unless for example, the retiree program is delivering an “excepted benefit”).
As July quickly approaches, self-insured group health plan sponsors are reminded that PCORI fees are due by July 31, 2015. (Insurers pay the fee for fully-insured plans.)
Payment may be submitted electronically or through the mail with the fee reported on Form 720 for the second quarter. According to the IRS, this particular ACA-related fee is tax deductible as a business expense.
Editable Version of the Form 720
Accompanying Instruction for the Form 720
HUB International Bulletin - Revised IRS Form 720 for Research Fee Now Available
HUB International Bulletin - New Employer Fee to Fund Study of Medical Treatments