IRS Publishes Clarifying Information on PCORI Fee

The first Patient Centered Outcomes Research Institute (“PCORI”) fee is due on July 31, 2013. This new fee, which was established by the Patient Protection and Affordable Care Act, will be paid annually by insurers and the sponsors of self-funded plans that have plan years ending after September 30, 2012, and before October 1, 2019.

On July 24 and 25, 2013, the Internal Revenue Service updated several pages of its website that contained information on the PCORI fee. The IRS updates do not seem to contain new information on the PCORI fee that was not available in final regulations issued by the IRS and the Department of the Treasury on December 6, 2012. The final regulations regarding the PCORI fee can be found here.

Instead of providing stakeholders with new information, the IRS updates use plain language to help clarify details surround the fee, including what plans are subject to the fee, what entities are responsible for paying the fee, and how the fee is calculated. Some general information on the fee can be found here, a frequently asked questions page can be found here, and a chart that shows what entity is responsible for paying the fee under various health plan arrangements can be found here.

Put simply, insurers and the sponsor of self-funded insurance plans that have plans with plan years that end on or after October 1, 2012 but before January 1, 2013 must pay the initial PCORI fee by July 31, 2013. The PCORI fee for plan years ending before October 1, 2013 is $1 per life covered by a medical plan—including dependents, COBRA continuation coverage beneficiaries and retirees. However, there are special counting rules for health reimbursement arrangements and health flexible spending accounts, and rules also exist that avoid duplication where a plan sponsor maintains multiple plans subject to the PCORI fee.  A self-funded plan sponsor or an insurer reports the number of lives covered by a plan and pays the fee by using the IRS Form 720. The Form 720 can be found here, and instructions for completing the form can be found here.

A short discussion pertaining to the Form 720 can be found here, and a short blog that discusses the possibility that PCORI fees may be deductible as a business expense can be found here.

About Jim Hamilton

I am an employee benefits partner with Bose McKinney & Evans LLP. My broad-based practice covers health and welfare arrangements, insurance, executive compensation and federal and state taxation. Among other areas, I have specific experience with PPACA, HIPAA, COBRA, ERISA and numerous other state and federal laws affecting employee benefit plans.
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