PCORI Tax: 2016
For the past three years we at KBM have discussed the Patient-Centered Outcomes Research Institute (PCORI) tax, a fee imposed by the Affordable Care Act (ACA) on issuers and plan sponsors of individual and group health plans.
For Employers enrolled in a “fully insured” health plan (most groups with <100 employees) the carrier will be paying this tax on your behalf. But, don’t worry, they build that cost into your monthly premium. You’re welcome.
Self-Insured employers will have to pay this tax directly by performing the calculations below and submitting the appropriate form to the IRS.
Often overlooked is the impact on employers who incorporate a Health Reimbursement Arrangement (HRA) into their benefit offerings. Unlike an HSA (Health Savings Account) the HRA is an employer owned and funded account that employees can use to pay for qualified and employer defined medical expenses. HRA’s are considered “self-insured” plans under the ACA requirements and, therefore, employers offering this benefit are considered “plan sponsors” and are responsible for the fee. They, too, must follow the payment calculation and form submission below.
The fee is due July 31 of the calendar year that follows the plan year end date. For example, fees for plans that ended between January 1, 2015 and December 31, 2015 are due on July 31, 2016.
The tax is dependent upon the number of “covered lives,” and will vary by year:
- Plans ending October 1, 2014 through September 30, 2015, the fee is $2.08 per covered life
- Plans ending October 1, 2015 through September 30, 2016, the fee is $2.17 per covered life
Each employee enrolled in the health plan that makes them eligible for the employers HRA counts as a covered life – spouses/dependents do not count.
The fees will be indexed each year and are tax deductible under IRS Tax Code Section 162(a). To report and pay the PCORI tax, you must file Form 720 (possibly the craziest tax form ever – Really! Just look at it), the Quarterly Federal Excise Tax Return, available on the IRS website.
For question about the PCORI tax please contact your KBM Representative.