Health Plan PCORI Fees Are Due August 2

Health Plan PCORI Fees Are Due August 2

by | 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

CMS Disclosure Requirement for Employer Health Plans

CMS Disclosure Requirement for Employer Health Plans

by | Feb 12, 2018 | Benefit Management, Compliance, Group Benefit Plans, Medicare

Do you offer health coverage to your employees? Does your group health plan cover outpatient prescription drugs? If so, federal law requires you to complete an online disclosure form every year with information about your plan’s drug coverage. You have 60 days from the start of your health plan year to complete the form. For instance, for a calendar-year health plan, this year’s deadline is March 1, 2018.

Background

The Centers for Medicare and Medicaid Services (CMS) is a federal agency that collects data and administers various federal programs. The agency utilizes the CMS online tool to collect information from employers about whether their group health plan’s prescription drug coverage is creditable or noncreditable. Creditable coverage means the group health plan’s prescription drug coverage is actuarially equivalent to Medicare’s Part D drug plans. In other words, the group plan is considered creditable if its drug benefits are as good as or better than Medicare’s benefits.
To confirm whether your plan provides creditable or noncreditable coverage, check with the plan’s carrier or HMO (if insured) or the plan’s actuary (if self-funded). CMS provides guidance to help plan sponsors, carriers, and actuaries determine the plan’s status.

Deadline for Disclosure

All group health plans that include any outpatient prescription drug benefits, regardless of whether the plan is insured, self-funded, grandfathered, or nongrandfathered, must complete the CMS disclosure requirement. There is no exception for small employers.
Complete the CMS online disclosure form every year within 60 days of the start of the plan year. For instance, for calendar-year plans, this year’s deadline is March 1, 2018.
Additionally, if your plan terminates or its status changes between creditable and noncreditable coverage, you must disclose the updated information to CMS within 30 days of the change.

Completing the Disclosure Form

The CMS online tool is the only method allowed for completing the required disclosure. From this link, follow the prompts to respond to a series of questions regarding the plan. The link is the same regardless of whether the employer’s plan provides creditable or noncreditable coverage.
The entire process usually takes only 5 or 10 minutes to complete. To save time, have the following information handy before you start filling in the form:

  • Information about the plan sponsor (employer): Name, address, phone number, and federal Employer Identification Number (EIN).
  • Number of prescription drug options offered (e.g., if employer offers two plan options with different benefit levels, the number is “2”).
  • Creditable/Noncreditable Offer: Indicate whether all options are creditable or noncreditable or whether some are creditable and others are noncreditable.
  • Plan year beginning and ending dates.
  • Estimated number of plan participants eligible for Medicare (and how many are participants in the employer’s retiree health plan, if any).
  • Date that the plan’s Notice of Creditable (or Noncreditable) Coverage was provided to participants.
  • Name, title, and email address of the employer’s authorized individual completing the disclosure.

We suggest you print a copy of the completed disclosure to keep for your records.
Note: Employers that receive the Retiree Drug Subsidy (RDS), or sponsor health plans that contract directly with one or more Medicare Part D plans, should seek the advice of legal counsel regarding the applicable disclosure requirements.

Additional Disclosure Requirement

Separate from the CMS online disclosure requirement, employers also must distribute a disclosure notice to Medicare-eligible group health plan participants. The deadline for distributing the participant notice is October 14 of the preceding year. It often is difficult for employers to identify which employees and spouses may be Medicare-eligible, so most employers simply distribute the notice to all participants regardless of age or status. For information about the notice requirement, see our previous post.

Originally Published By ThinkHR.com