PCORI Fee Due July 31st
The Affordable Care Act (ACA) imposes a fee on health insurance issuers and plan sponsors of self-insured health plans to help fund the Patient-Centered Outcomes Research Institute. The fee, called the Patient-Centered Outcomes Research Institute (PCORI) fee, is calculated based on the average number of lives covered under the policy or plan. PCORI fees are reported and paid annually using IRS Form 720 (Quarterly Federal Excise Tax Return). These fees are due each year by July 31 of the year following the last day of the plan year. The IRS instructions for filing form 720 include information on reporting and paying the PCORI fees.
Issuers and plan sponsors are required to report the average number of lives covered under the plan separately for specified health insurance policies and applicable self-insured health plans. That number is then multiplied by the applicable rate for that tax year, as follows:
|Plan Year Ending:||Amount Per Covered Life:|
|January 2016 – September 2016||$2.17|
|October 2016 – December 2016||$2.26|
To determine the average number of covered lives, the plan sponsor of a self-insured health plan may use one of the following methods:
|Actual Count Method:||Add the total number of lives covered for each day of the plan year and divide that total by the total number of days in the plan year
|Snapshot Method:||Use the total number of lives covered on one date (or more dates if an equal number of dates is used in each quarter) during the first, second or third month of each quarter, and divide that total by the number of dates on which a count was made
|Form 5500 Method:||Use the number of participants reported on the Form 5500, Annual Return/Report of Employee Benefit Plan|
ACA Affordability Percentage Decreases
Under the Affordable Care Act (ACA) Employer Shared Responsibility provision, an applicable large employer (ALE) must offer minimum essential coverage that provides minimum value and is affordable, or face a potential penalty. Each year, the IRS issues indexing adjustments outlining the percentage of the employee’s household income an employer can charge the employee for the coverage. For plan years beginning on or after January 1, 2018, coverage is considered affordable if it does not exceed 9.56% of the employee’s household income. Traditionally, this percentage has increased annually, but 2018 will mark the first year of a decrease in the affordability percentage.