New fee imposed for self-insured health plans

PCORI & 5500

The Affordable Care Act (ACA) imposes a fee 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 (PCORI). The Form 5500 Annual Return/Reports are a critical enforcement, compliance, and research tool for the DOL, the IRS, and PBGC. The Form 5500 data is also an important resource for other federal agencies in assessing employee benefit, tax, and economic trends and policies. Additionally, the Form 5500 is the primary public disclosure document for participating employers, plan participants and beneficiaries, and the public to monitor the operations of plans, including multiple-employer plans (MEPs) and group filing arrangements.

For more information on whether a type of insurance coverage or arrangement is subject to the fee, the IRS has provided this useful chart. Do note, that self-insured health plans include health reimbursement arrangements (HRAs) and level-funded arrangements. This fee is nothing new; it applies to policy or plan years ending on or after October 1, 2012, and before October 1, 2029. As for the 5500, there have been some changes made and should be reviewed prior to submitting your 5500 or 5500-SF.

Self-insured plan sponsors can satisfy their PCORI compliance obligations by completing and filing Form 720, with its accompanying 720-V payment voucher. Although Form 720 is a quarterly return, for PCORI, Form 720 is filed annually only, by July 31. The updated form can be found here, and the PCORI fee reporting can be found in Part II, Line 133.

The applicable fee per covered life is determined by the end of the plan year.

There are three methods for calculating the average number of covered lives; Actual Count Method, Snapshot Method, and 5500 Method. The IRS has issued detailed guidance on the multiple methods that can be used to calculate the PCORI fee. As a reminder, covered lives include spouses, dependents, retirees, and COBRA beneficiaries.

If a plan sponsor offers a stand-alone HRA, it must use one of the methods to count the average number of covered lives. If the HRA is integrated with an insured plan, the plan sponsor will be responsible for a separate PCORI fee on the HRA covered lives, even though the insurer will pay for the covered lives under the insured plan. Plan sponsors of an HRA integrated with a non-account self-insured plan will not have to pay separately on the self-insured plan and HRA.

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Commentary by: Raylea Stelmach

Edited by: Jessica McIntosh