by admin | Jul 15, 2021 | ACA, Benefit Management, Group Benefit Plans
Do you offer coverage to your employees through a self-insured group health plan? Do you sponsor a Health Reimbursement Arrangement (HRA)? If so, do you know whether your plan or HRA is subject to the annual Patient-Centered Research Outcomes Institute (PCORI) fee?
This article answers frequently-asked questions about the PCORI fee, which plans are affected, and what you need to do as the employer sponsor. PCORI fees for 2020 health plans and HRAs are due August 2, 2021.
What is the PCORI fee?
The Affordable Care Act (ACA) created the Patient-Centered Outcomes Research Institute to study clinical effectiveness and health outcomes. To finance the nonprofit institute’s work, a small annual fee is charged on health plans.
Most employers do not have to take any action because most employer-sponsored health plans are provided through group insurance contracts. For insured plans, the carrier is responsible for the PCORI fee and the employer has no duties.
If, however, you are an employer that self-insures a health plan or an HRA, it is your responsibility to determine whether PCORI applies and, if so, to calculate, report, and pay the fee.
The annual PCORI fee is equal to the average number of lives covered during the health plan year, multiplied by the applicable dollar amount:
- If the plan year end date was between January 1 and September 30, 2020: $2.54.
- If the plan year end date was between October 1 and December 31, 2020: $2.66.
Payment is due by July 31 following the end of the calendar year in which the plan year ended. If July 31 falls on a weekend, the due date is the next following business day. So the due date for plan years ending in 2020 is August 2, 2021.
Does the PCORI fee apply to all health plans?
The fee applies to all health plans and HRAs, excluding the following:
- Plans that primarily provide “excepted benefits” (e.g., stand-alone dental and vision plans, most health flexible spending accounts with little or no employer contributions, and certain supplemental or gap-type plans).
- Plans that do not provide significant benefits for medical care or treatment (e.g., employee assistance, disease management, and wellness programs).
- Stop-loss insurance policies.
- Health savings accounts (HSAs).
The IRS provides a helpful chart indicating the types of health plans that are, or are not, subject to the PCORI fee.
If I have multiple self-insured plans, does the fee apply to each one?
Yes. For instance, if you self-insure one medical plan for active employees and another medical plan for retirees, you will need to calculate, report, and pay the fee for each plan. There is an exception, though, for “multiple self-insured arrangements” that are sponsored by the same employer, cover the same participants, and have the same plan year. For example, if you self-insure a medical plan with a self-insured prescription drug plan, you would pay the PCORI fee only once with respect to the combined plan.
Does the fee apply to HRAs?
Yes. The PCORI fee applies to HRAs, which are self-insured health plans, although the fee is waived in some cases. If you self-insure another plan, such as a major medical or high deductible plan, and the HRA is merely a component of that plan, you do not have to pay the PCORI fee separately for the HRA. In other words, when the HRA is integrated with another self-insured plan, you only pay the fee once for the combined plan.
On the other hand, if the HRA stands alone, or if the HRA is integrated with an insured plan, you are responsible for paying the fee for the HRA.
What about QSEHRAs? Does the fee apply?
Yes. A Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is special type of tax-advantaged arrangement that allows small employers to reimburse certain health costs for their workers. Although a QSEHRA is not the same as an HRA, and the rules applying to each type are very different, a QSEHRA is a self-insured health plan for purposes of the PCORI fee. The IRS provides guidance confirming that small employers that offer QSEHRAs must calculate, report and pay the PCORI fee.
What about ICHRAs and EBHRAs? Does the fee apply?
An Individual Coverage Health Reimbursement Arrangement (ICHRA) is a new type of tax-advantaged arrangement, first offered in 2020, that allows employers to reimburse certain health costs for their workers. The IRS has not provided specific guidance regarding ICHRAs and the PCORI fee, but it appears the fee applies since an ICHRA is a self-insured health plan.
An Excepted Benefits Health Reimbursement Arrangement (EBHRA) also is a self-insured health plan but it is limited to “excepted benefits,” such as dental and vision care costs. So the PCORI fee does not apply to EBHRAs.
Can I use ERISA plan assets or employee contributions to pay the fee?
No. The PCORI fee is an employer expense and not a plan expense, so you cannot use ERISA plan assets or employee contributions to pay the fee. (An exception is allowed for certain multiemployer plans (e.g., union trusts) subject to collective bargaining.) Since the fee is paid by the employer as a business expense, it is tax deductible.
How do I calculate the fee?
Multiply $2.54 or $2.66 (depending on the date the plan year ended in 2020) times the average number of lives covered during the plan year. “Covered lives” are all participants, including employees, dependents, retirees, and COBRA enrollees.
You may use any one of the following counting methods to determine the average number of lives:
- Average Count Method: Count the number of lives covered on each day of the plan year, then divide by the number of days in the plan year.
- Snapshot Method: Count the number of lives covered on the same day each quarter, then divide by the number of quarters (e.g., four). Or count the lives covered on the first of each month, then divide by the number of months (e.g., 12). This method also allows the option — called the “snapshot factor method” — of counting each primary enrollee (e.g., employee) with single coverage as “1” and counting each primary enrollee with family coverage as “2.35.”
- Form 5500 Method: Add together the “beginning of plan year” and “end of plan year” participant counts reported on the Form 5500 for the plan year. There is no need to count dependents using this method since the IRS assumes the sum of the beginning and ending of year counts is close enough to the total number of covered lives. If the plan is employee-only without dependent coverage, divide the sum by 2. (If Form 5500 for the plan year ending in 2020 is not filed by August 2, 2021, you cannot use this counting method.)
- Any Reasonable Method: This method is an exception allowed only for plan years ending between October 1, 2019 and September 30, 2020. Typically, only the first three methods above are allowed. The IRS recognizes, however, that plan sponsors may not have tracked counts using those methods since the fee had expired before it was unexpectedly reinstated by Congress in late 2019. In Notice 2020-44, the IRS explains that plan sponsors may use any reasonable method to determine the plan’s average number of covered lives
For an HRA, QSEHRA or ICHRA, count only the number of primary participants (employees) and disregard any dependents.
How do I report and pay the fee?
Use Form 720, Quarterly Excise Tax Return, to report and pay the annual PCORI fee. Report all information for self-insured plan(s) with plan year ending dates in 2020 on the same Form 720. Do not submit more than one Form 720 for the same period with the same Employer Identification Number (EIN), unless you are filing an amended return.
The IRS provides Instructions for Form 720. Here is a quick summary of the items for PCORI:
- Fill in the employer information at the top of the form.
- In Part II, complete line 133(c) and/or line 133(d), as applicable, depending on the plan year ending date(s). If you are reporting multiple plans on the same line, combine the information.
- In Part II, complete line 2 (total).
- In Part III, complete lines 3 and 10.
- Sign and date Form 720 where indicated.
- If paying by check or money order, also complete the payment voucher (Form 720-V) provided on the last page of Form 720. Be sure to fill in the circle for “2nd Quarter.” Refer to the Instructions for mailing information.
Caution! Before taking any action, confirm with your tax department or controller whether your organization files Form 720 for any purposes other than the PCORI fee. For instance, some employers use Form 720 to make quarterly payments for environmental taxes, fuel taxes, or other excise taxes. In that case, do not prepare Form 720 (or the payment voucher), but instead give the PCORI fee information to your organization’s tax preparer to include with its second quarterly filing.
Summary
If you self-insure one or more health plans or sponsor an HRA, you may be responsible for calculating, reporting, and paying annual PCORI fees. The fee is based on the average number of lives covered during the health plan year. The IRS offers a choice of different counting methods to calculate the plan’s average covered lives. Once you have determined the count, the process for reporting and paying the fee using Form 720 is fairly simple. For plan years ending in 2020, the deadline to file Form 720 and make your payment is August 2, 2021.
By Kathleen A. Berger, CEBS
Originally posted on Trustmineral.com
by admin | Jun 2, 2020 | ACA, COVID-19, Human Resources
The coronavirus crisis has forced human resources teams to juggle more challenges than ever before, from employee benefits and sick leave to new teleworking policies. On top of this, the drastic change in the American workplace has spawned new laws and protocols, while raising questions about how these new regulations affect standing legislation like the Americans with Disabilities Act (ADA). In order to remain fully compliant, HR departments need to keep abreast of the latest developments, especially regarding the Families First Coronavirus Response Act (FFCRA), which officially went into effect April 2. Here’s some guidance on how to remain ADA-compliant while your company implements new policies in response to COVID-19.
Calling In Sick & Recruitment
According to the EEOC, the reasonable accommodation and nondiscrimination regulations mandated by the ADA, as well as the Rehabilitation Act, are still in effect; however, they “do not interfere with or prevent employers from following the guidelines and suggestions made by the CDC or state/local public health authorities about steps employers should take regarding COVID-19.” So as a general rule of thumb, any guidelines or protocols made by the CDC are considered independent from the ADA, and can be acted on accordingly while remaining compliant. Still, there are a few scenarios where the coronavirus takes precedent.
For example, if an employee covered by the ADA calls in sick, employers may request information about the illness, in order to protect the health and wellbeing of the workforce, as reported by the EEOC. If the employee exhibits symptoms of COVID-19, the ADA allows the employer to require the employee to stay home.
The EEOC also offers guidance if an employer is hiring during the crisis. After making a conditional job offer, employers can screen potential hires for coronavirus symptoms—so long as this practice is applied to all employees that are entering the same or similar position.
Employees With COVID-19
If an employee contracts coronavirus, their symptoms would likely not qualify as a disability according to ADA guidelines. Temporary impairments with no substantial long-term impact, like broken limbs, concussions, pneumonia, and influenza, are typically not considered disabilities under the law.
However, according to Littler Mendelson P.C., a legal firm specializing in labor and employment law, an employee with severe COVID-19 symptoms, or one whose symptoms worsen or complicate a pre existing health issue or concern, could be entitled to ADA accommodation or protection. A panel consisting of Littler counsel, shareholders, and associates report that “the ADA requires employers to assess whether a particular employee is “disabled” under the ADA on an individualized basis, taking into account the employee’s particular reaction to the illness, their symptoms and any other relevant considerations.”
It’s also important to refer to your state’s specific disability laws, and pay particular attention to how your state defines disability. If those laws are more lax than the ADA’s, it’s possible an employee with COVID-19 could qualify for disability.
By Bill Olson
Originally posted on ubabenefits.com
by admin | Apr 4, 2019 | ACA
On June 19, 2018, the U.S. Department of Labor (DOL) published Frequently Asked Questions About Association Health Plans (AHPs) and issued a final rule that broadens the definition of “employer” and the provisions under which an employer group or association may be treated as an “employer” sponsor of a single multiple-employer employee welfare benefit plan and group health plan under Title I of the Employee Retirement Income Security Act (ERISA).
The final rule is intended to facilitate adoption and administration of AHPs and expand health coverage access to employees of small employers and certain self-employed individuals. Generally, it does this in four main ways:
- It relaxes the requirement that group or association members share a common interest, as long as they operate in a common geographic area.
- It confirms that groups or associations whose members operate in the same trade, industry, line of business, or profession can sponsor AHPs, regardless of geographic distribution.
- It clarifies the existing requirement that groups or associations sponsoring AHPs must have at least one substantial business purpose unrelated to providing health coverage or other employee benefits.
- It permits AHPs that meet the final rule’s new requirements to enroll working owners who do not have employees.
The final rule was effective on August 20, 2018.
The final rule applied to fully insured AHPs on September 1, 2018, to existing self-funded AHPs on January 1, 2019, and to new self-funded AHPs formed under this final rule on April 1, 2019.
The DOL used a staggered approach to implement this final rule so states and state insurance regulators would have time to tailor their regulations to the final rule and address a range of oversight and compliance assistance issues, especially concerns about self-funded AHPs’ vulnerability to financial mismanagement and abuse.
On March 28, 2019, the U.S. District Court for the District of Columbia (Court) found that the DOL’s final rule exceeded the statutory authority delegated by Congress under ERISA and that the final rule unlawfully expands ERISA’s scope. In particular, the Court found the final rule’s provisions – defining “employer” to include associations of disparate employers and expanding membership in these associations to include working owners without employees – are unlawful and must be set aside.
The Court’s order vacates the specific provisions of the DOL’s final rule regarding “bona fide group or association of employers,” “commonality of interest,” and “dual treatment of working owners as employers and employees.” The Court order sends the final rule back to the DOL to consider how the final rule’s severability provision affects the final rule’s remaining portions.
The Court’s order does not affect employers who formed AHPs under the DOL’s previous guidance regarding the definition of “employer.” Both existing and new employer groups or associations that meet the DOL’s pre-rule guidance can continue to sponsor an AHP.
This order stops employers from sponsoring new self-funded AHPs under the final rule beginning on April 1, 2019.
For an employer that relies on the final rule’s expanded definition of “employer” to currently sponsor a fully insured AHP or existing self-funded AHP, the employer should consult with its attorney as soon as possible. If the employer can meet the DOL’s pre-rule guidance, then it can continue to sponsor an AHP.
However, if the employer cannot meet the DOL’s pre-rule guidance, then the employer should consult with its attorney to determine whether it can amend its structure and plan document to meet the DOL’s pre-rule guidance. If it cannot meet the DOL’s pre-rule guidance through plan amendment, then the employer should consult with its attorny on how to proceed because the AHP will no longer qualify as an ERISA plan and may be subject to the ACA’s individual market and small group market rule as well as state regulation.
Although the DOL issued Questions and Answers after the Court’s decision, the DOL has not indicated how it will proceed. The DOL could revise its final rule or could appeal the decision and request that the Court stay its decision pending the appeal. Employers in AHPs should keep apprised of future developments in this case.
Read the full Advisor
Credits:
United Benefit Advisors
by admin | Dec 5, 2018 | ACA, Compliance, IRS
On November 29, 2018, the IRS released Notice 2018-94 to extend the due date for employers to furnish 2018 Form 1095-C or 1095-B under the Affordable Care Act’s employer reporting requirement. Employers will have an extra month to prepare and distribute the 2018 form to individuals. The due dates for filing forms with the IRS are not extended.
Background
Applicable large employers (ALEs), who generally are entities that employed 50 or more full-time and full-time-equivalent employees in 2017, are required to report information about the health coverage they offered or did not offer to certain employees in 2018. To meet this reporting requirement, the ALE will furnish Form 1095-C to the employee or former employee and file copies, along with transmittal Form 1094-C, with the IRS.
Employers, regardless of size, that sponsored a self-funded (self-funded) health plan providing minimum essential coverage in 2018 are required to report coverage information about enrollees. To meet this reporting requirement, the employer will furnish Form 1095-B to the primary enrollee and file copies, along with transmittal Form 1094-B, with the IRS. Self-funded employers who also are ALEs may use Forms 1095-C and 1094-C in lieu of Forms 1095-B and 1094-B.
Extended Due Dates
Specifically, Notice 2018-94 extends the following due dates:
- The deadline for furnishing 2018 Form 1095-C, or Form 1095-B, if applicable, to employees and individuals is March 4, 2019 (extended from January 31, 2019).
- The deadline for filing copies of the 2018 Forms 1095-C, along with transmittal Form 1094-C (or copies of Forms 1095-B with transmittal Form 1094-B), if applicable, remains unchanged:
- If filing by paper, February 28, 2019.
- If filing electronically, April 1, 2019.
The extended due date applies automatically so employers do not need to make individual requests for the extension.
More Information
Notice 2018-94 also extends transitional good-faith relief from certain penalties to the 2018 employer reporting requirements.
Lastly, the IRS encourages employers, insurers, and other reporting entities to furnish forms to individuals and file reports with the IRS as soon as they are ready.
by Kathleen Berger
Originally posted on ThinkHR.com
by admin | Nov 7, 2018 | ACA, Compliance, Human Resources, IRS
On November 5, 2018, the Internal Revenue Service (IRS) released Notice 2018-85 to announce that the health plan Patient-Centered Outcomes Research Institute (PCORI) fee for plan years ending between October 1, 2018 and September 30, 2019 will be $2.45 per plan participant. This is an increase from the prior year’s fee of $2.39 due to an inflation adjustment.
Background
The Affordable Care Act created the PCORI to study clinical effectiveness and health outcomes. To finance the nonprofit institute’s work, a small annual fee — commonly called the PCORI fee — is charged on group health plans.
The fee is an annual amount multiplied by the number of plan participants. The dollar amount of the fee is based on the ending date of the plan year. For instance:
- For plan year ending between October 1, 2017 and September 30, 2018: $2.39.
- For plan year ending between October 1, 2018 and September 30, 2019: $2.45.
Insurers are responsible for calculating and paying the fee for insured plans. For self-funded health plans, however, the employer sponsor is responsible for calculating and paying the fee. Payment is due by filing Form 720 by July 31 following the end of the calendar year in which the health plan year ends. For example, if the group health plan year ends December 31, 2018, Form 720 must be filed along with payment no later than July 31, 2019.
Certain types of health plans are exempt from the fee, such as:
- Stand-alone dental and/or vision plans;
- Employee assistance, disease management, and wellness programs that do not provide significant medical care benefits;
- Stop-loss insurance policies; and
- Health savings accounts (HSAs).
HRAs and QSEHRAs
A traditional health reimbursement arrangement (HRA) is exempt from the PCORI fee, provided that it is integrated with another self-funded health plan sponsored by the same employer. In that case, the employer pays the PCORI fee with respect to its self-funded plan, but does not pay again just for the HRA component. If, however, the HRA is integrated with a group insurance health plan, the insurer will pay the PCORI fee with respect to the insured coverage and the employer pays the fee for the HRA component.
A qualified small employer health reimbursement arrangement (QSEHRA) works a little differently. A QSEHRA is a special type of tax-preferred arrangement that can only be offered by small employers (generally those with fewer than 50 employees) that do not offer any other health plan to their workers. Since the QSEHRA is not integrated with another plan, the PCORI fee applies to the QSEHRA. Small employers that sponsor a QSEHRA are responsible for reporting and paying the PCORI fee.
PCORI Nears its End
The PCORI program will sunset in 2019. The last payment will apply to plan years that end by September 30, 2019 and that payment will be due in July 2020. There will not be any PCORI fee for plan years that end on October 1, 2019 or later.
Resources
The IRS provides the following guidance to help plan sponsors calculate, report, and pay the PCORI fee:
Originally posted on thinkhr.com
