IMPORTANT: Patient-Centered Outcomes Research Fee on Self-insured Health Plans, Health FSA's and HRA's DUE JULY 31, 2013

The Patient Protection and Affordable Care Act (Obama Care) instituted an excise tax on issuers of certain health insurance policies and plan sponsors of certain self-insured health plans to fund the Patient-Centered Outcomes Research Trust Fund (also known as Patient-Centered Outcomes Research Fee) for plan years ending on or after October 1, 2012.

The Patient Protection and Affordable Care Act (Obama Care) instituted an excise tax on issuers of certain health insurance policies and plan sponsors of certain self-insured health plans to fund the Patient-Centered Outcomes Research Trust Fund (also known as Patient-Centered Outcomes Research Fee) for plan years ending on or after October 1, 2012.

The excise tax is reported on Part II IRS No. 133 of Form 720, Quarterly Federal Excise Tax Form, as “Applicable self-insured health plans” and is due July 31, 2013.  For 2012, the tax rate is $1.00 times the average number of covered lives as defined below.

The Form 720 can be found on the IRS website: http://www.irs.gov/pub/irs-pdf/f720.pdf

A health flexible spending arrangement (health FSA) and a health reimbursement arrangement (HRA) is considered a self-insured plan and is subject to the excise tax.

If a health FSA or HRA has the same plan sponsor as another applicable self-insured health plan other than a health FSA or HRA, the two arrangements may be treated as a single plan for purposes of determining the excise tax.

Calculating the Average Number of Lives

Self-insured Health Plan (including Plan Sponsors with a Self-insured Health Plan and health FSA or HRA)

The definition of covered lives is the total number of individuals covered by the plan.  This includes the enrolled participant/employee,  spouse, dependent or any other beneficiary of the participant in the plan.

There are 4 methods allowed for calculating the average number of lives:

1. Actual count method – calculated by adding the total lives covered each day of the plan year and dividing by the total number of days in the plan year.

2. Snapshot method – calculated by adding the total lives covered on one date in each quarter (the date in each quarter must be within 3 days of the date used in the 1st quarter, easiest to use the end of each quarter) and dividing by 4.

3. Form 5500 method

a. If the plan offers only self-only (employee only) insurance it is calculated by taking the sum of the total participants covered at the beginning and end of the plan year, as reported on the Form 5500, divided by 2.

b. If the plan offers coverage other than self-only it is calculated by summing the total participants convered at the beginning and end of the plan year as reported on the Form 5500.

4. 1st year of calculation of tax – For plan years beginning before 7/11/12 and ending on or after 10/1/12, the average number of lives covered under the plan for the plan year may be calculated using any reasonable method.

 

Health FSA or HRA

For a health FSA and HRA, covered lives includes only the participant (does not include spouse, dependent or any other beneficiary of the participant).

There are 4 methods allowed for calculating the average number of lives:

5. Actual count method – calculated by adding the total lives covered each day of the plan year and dividing by the total number of days in the plan year.

6. Snapshot method – calculated by adding the total lives covered on one date in each quarter (the date in each quarter must be within 3 days of the date used in the 1st quarter, easiest to use the end of each quarter) and dividing by 4.

7. Form 5500 method – calculated by taking the sum of the total participants covered at the beginning and end of the plan year, as reported on the Form 5500, divided by 2.

8. 1st year of calculation of tax – For plan years beginning before 7/11/12 and ending on or after 10/1/12, the average number of lives covered under the plan for the plan year may be calculated using any reasonable method.

 

 

Please contact us at The VanderBloemen Group if you need assistance in completing the form.