PCORI Tax Payment Reminder: Deadline is July 31
July 7, 2015 at 1:46 pm | Posted in Affordable Care Act, Archer Medical Savings Account, Flexible Spending Accounts, PCORI | Leave a commentTags: ACA, Affordable Care Act, Patient Centered Outcomes Research Institute, PCORI, tax
1. Introduction
The Affordable Care Act imposes a tax on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to help fund the Patient-Centered Outcomes Research Institute which is a federal institute designed to assist health care providers, consumers, and policymakers in making informed healthcare decisions and advancing the quality of healthcare delivery. Health insurers will roll their PCORI tax payments into their premium rate increases. The tax, required to be reported only once a year on the second quarter Form 720 and paid by its due date, July 31, is based on the average number of lives covered under the policy or plan.
The PCORI tax is temporary. It is imposed on health insurance policies and self funded plans for each policy year ending on or after October 1, 2012, and before October 1, 2019.
2. Which Plan Pays the PCORI Tax?
Depending upon the nature of the coverage and health plan, the entity responsible for paying the PCORI fee will differ.
| Type of Coverage/Plan | Responsible PCORI Fee Paying Entity |
| Fully Insured Health Plan | Health Insurer |
| Self-Insured Plan | Plan Sponsor |
| HRA or FSA Combined with Fully-Insured Plan | The Plan Sponsor will pay the fee for each covered life under the HRA or FSA. The health insurer will pay the fee for each covered life under the health insurance policy. There can be two fee payments for the same lives. See note below about possible FSA treatment as an excepted benefit which would not trigger a PCORI payment. |
| HRA Integrated with Self Insured Plan | Plan Sponsor, but will not pay twice for the same lives insured under the Self Insured Plan and the HRA. |
| FSA Integrated with Self Insured Plan | Plan Sponsor, but will not pay twice for the same lives insured under the Self Insured Plan and the FSA. |
| COBRA | If COBRA coverage is fully insured, the health insurer will pay. If COBRA coverage is self-insured, the Plan Sponsor will pay. |
| Retiree Health Plans (RHP | If the RHP is fully insured, the health insurer will pay. If the RHP is self- insured, the Plan Sponsor will pay. |
The PCORI fee does not apply to Employee Assistance Programs, disease management programs or wellness programs if the program does not provide “significant benefits in the nature of medical care or treatment.” Finally, the regulations specifically exclude the following types of coverage from the self-insured PCORI fee analysis: excepted benefits under Internal Revenue Section 9832 (c); any insurance policy designed to cover employees working or residing outside of the United States; any Stop Loss or indemnity reinsurance policy.
IMPORTANT NOTE ABOUT FSA! : A PCORI fee is not payable on an FSA unless the employer provides a credit of, or funding of, at least $500. If the FSA is funded strictly by employee contributions and is paired with a major medical plan, there should be no PCORI fee since it would satisfy the IRS definition of an excepted benefit.
3. IRS PCORI Payment Chart
The IRS has provided a payment chart (link below) to assist plan sponsors in determining when their filing deadlines are for 2014 and 2015 and what the per person PCORI tax rate is. Plan years that concluded during 2014 have to file by July 31, 2015. Plan sponsors should note that the PCORI tax rate changed mid-year in 2014. Consequently, those filing for 2014 months from January through September 2014 will pay a rate of $2.00 while those ending in the October to December 2014 period will pay a PCORI rate of $2.08.
4. Ability To Deduct PCORI Tax Payment As A Business Expense
The IRS has announced that: “ The required PCORI fee will be an ordinary and necessary business expense paid or incurred in carrying on a trade or business and, therefore, will be deductible under § 162.” A copy of the IRS memo is here: http://www.irs.gov/pub/irs-utl/AM2013-002.pdf
5. More Information About PCORI
You can learn more about PCORI at the following IRS links:
Patient-Centered Outcomes Research Trust Fund Fee: Questions and Answers
Reminder: Amendment Regarding OTC Drug Reimbursement Restriction Needed for Cafeteria Plans Before July 1st
June 16, 2011 at 1:54 pm | Posted in Archer Medical Savings Account, Cafeteria Plans, Flexible Spending Accounts, Health Reimbursement Account | Leave a commentTags: Cafeteria Plan, FSA, HRA, HSA, IRS, MSA, OTC Drug Reimbursement
a. IRS Notice 2010-59
In September 2010 the IRS announced changes in the scope of allowable tax qualified prescription drug purchases. The announcement was driven by the March 2010 federal health care legislation that changed the rules for the reimbursement of over the counter (“OTC”) drugs. Prior to the enactment of the legislation, employee reimbursements or expenses for OTC purchases allowed under a Flexible Spending Account (“FSA”), a Health Reimbursement Account (“HRA”) or an Archer Medical Savings Account (“MSA”) were not counted as part of an employee’s gross income. The legislation provides, however, that beginning after December 31, 2010, expenses incurred under the above health care accounts for medicine or a drug shall be treated as a reimbursement for medical expenses only if it is a prescribed drug or the drug is insulin. An OTC drug purchase can still be a reimbursable event but only if there is a prescription that directs its purchase or it is a purchase of insulin. Conversely, OTC drugs purchased, without a prescription through December 31, 2010 may still be reimbursed tax free at any time pursuant to the terms of the employer’s plan.
The purchase of medical supplies and diagnostic devices (crutches, eye glasses, blood sugar test kits) are still recognized as a tax qualified expense and are not impacted by the IRS announcement.
The IRS also announced that it would allow retroactive amendments of cafeteria plans to allow for the new restriction if done no later than June 30th.
A complete copy of the notice can be accessed by clicking the following link: www.irs.gov/pub/irs-drop/n-10-59.pdf
b. The Price of Non Compliance
The IRS Notice is unequivocal that payments made from an HSA or Archer MSA for any medicine or drug that does not satisfy the prescription requirement above, will be treated as a nonqualified medical expense which will be included in an individual’s gross income and generally subject to a 20% additional tax.
c. How Do I Retroactively Amend My Cafeteria Plan?
If you have not amended your plan yet, you should do so now. You can amend, in writing, your cafeteria plan at any time during the year. Typically amendments are prospective from the date of the amendment but the IRS has allowed for a retroactive effect in this situation. Review your plan to determine who, i.e. the Board of Directors, the Plan Sponsor or a Plan Administrator, has the authority to approve the amendment. If your FSA or HRA is part of an ERISA plan, caution suggests issuing a summary of material modification to plan participants no later than 60 days after adoption of the amendment since the new plan restriction is reducing the scope of tax free drug purchases allowable under the plan.
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