2016 PCORI Fee Reminder

PCORI Fee Overview and Guidance

The Affordable Care Act imposes fees 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. The fees, required to be reported annually on the 2nd quarter Form 720 and paid by its due date, July 31st, are based on the average number of lives covered under the policy or plan. The fees apply to policy or plan years ending on or after October 1, 2012, and before October 1, 2019. HRCTS will make available an Average Covered Lives Report to all clients that are responsible to file and pay the PCORI fee each year. You can request this report by contacting your Account Management Team.

The IRS recently released the revised Form 720 that insurers and sponsors of self-insured plans will use to pay the Patient-Centered Outcomes Research Institute (PCORI) fee. The fee is due by July 31 of the year following the calendar year in which the plan/policy year ended. Sponsors of any plans that ended in 2015 must pay the 2015 fee by July 31,2016.  Plan sponsors can now complete their planning for payment of this fee. The IRS has also confirmed health insurers and self-insured health plan sponsors can deduct PCORI fees as ordinary and necessary business expenses. The fee is based on the number of covered lives including employees, retirees and COBRA participants along with their covered dependent spouses and children are all counted. However, only the employee, retiree or COBRA participant needs to be counted for an HRA or a health flexible spending account (health FSA) -- dependents covered by these accounts can be excluded.

The types of plans that must pay the PCORI Fees by July 31, 2016 include:

  • Health/accident plans
  • Health Reimbursement Arranagement (HRA) plans that are not an excepted benefit (Employer contribution is greater than $500)
  • Health Flexible Spending Account (FSA) plans that are not an excepted benefit (Plan has employer contributions with the maximum reimbursement greater than two times an employee’s salary reduction election or employer contribution is greater than $500)
  • Retiree plans

Calculating the Fee:

The amount of the PCORI fee is equal to the average number of lives covered during the policy year or plan year multiplied by the applicable dollar amount for the year.

  • For plan years that end on or after October 1, 2014, and before October 1, 2015, the fee is $2.08.
  • For plan years that end on or after October 1, 2015, and before October 1, 2016, the fee is $2.17.

For policy and plan years beginning on or after Oct. 1, 2016, and before Oct. 1, 2019, the applicable dollar amount is further adjusted to reflect inflation in National Health Expenditures, as determined by the Secretary of Health and Human Services.

IRS Form 720 and Instructions:

IRS Form 720 can be accessed at http://www.irs.gov/pub/irs-pdf/f720.pdf which is an interactive document so that can be completed on line.

 

The PCORI fees are entered on line 133 for the appropriate plans. See pages 8 and 9 of the IRS Instructions for completing these fields. Instructions can be found at http://www.irs.gov/pub/irs-pdf/i720.pdf.

 

 

Complete the fields on page 7 and make your check or money order payable to “United States Treasury”.

Additional information on the PCORI fees can be found here:
Patient-Centered Outcomes Research Trust Fund Fee (IRC 4375, 4376 and 4377): Questions and Answers

• An IRS chart that shows which types of benefits the fee applies to:  Application of the Patient-Centered Outcomes Research Trust Fund Fee to Common Types of Health Coverage or Arrangements

IRS Form 720 Overview

IRS Form 720 instructions (see pages 8 to 9)

Please Note:
This information is provided for educational purposes only. It reflects the understanding of HRC Total Solutions and our partners using the available guidance as of the date shown and is subject to change. It is not intended to provide legal advice.  You should not act on this information without consulting legal counsel or tax advisors.  (Updated June 16, 2016)


2015 PCORI Fee Reminder

PCORI Fee Overview and Guidance

The Affordable Care Act imposes fees 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. The fees, required to be reported annually on the 2nd quarter Form 720 and paid by its due date, July 31st, are based on the average number of lives covered under the policy or plan. The fees apply to policy or plan years ending on or after October 1, 2012, and before October 1, 2019. HRCTS will make available an Average Covered Lives Report to all clients that are responsible to file and pay the PCORI fee each year. You can request this report by contacting your Account Management Team.

The IRS recently released the revised Form 720 that insurers and sponsors of self-insured plans will use to pay the Patient-Centered Outcomes Research Institute (PCORI) fee. The fee is due by July 31 of the year following the calendar year in which the plan/policy year ended. Sponsors of any plans that ended in 2014 must pay the 2014 fee by July 31,2015.  Plan sponsors can now complete their planning for payment of this fee. The IRS has also confirmed health insurers and self-insured health plan sponsors can deduct PCORI fees as ordinary and necessary business expenses. The fee is based on the number of covered lives including employees, retirees and COBRA participants along with their covered dependent spouses and children are all counted. However, only the employee, retiree or COBRA participant needs to be counted for an HRA or a health flexible spending account (health FSA) -- dependents covered by these accounts can be excluded.

The types of plans that must pay the PCORI Fees by July 31, 2015 include:

  • Health/accident plans
  • Health Reimbursement Arranagement (HRA) plans that are not an excepted benefit (Employer contribution is greater than $500)
  • Health Flexible Spending Account (FSA) plans that are not an excepted benefit (Plan has employer contributions with the maximum reimbursement greater than two times an employee’s salary reduction election or employer contribution is greater than $500)
  • Retiree plans

Calculating the Fee:

The amount of the PCORI fee is equal to the average number of lives covered during the policy year or plan year multiplied by the applicable dollar amount for the year.

  • For plan years that end between January 2, 2014, and before October 1, 2014 the fee will be $2.
  • For plan years that end on or after October 1, 2014, and before October 1, 2015, the fee is $2.08.
  • For plan years that end on or after October 1, 2015, and before October 1, 2016, the fee is $2.17.

For policy and plan years beginning on or after Oct. 1, 2015, and before Oct. 1, 2019, the applicable dollar amount is further adjusted to reflect inflation in National Health Expenditures, as determined by the Secretary of Health and Human Services.

IRS Form 720 and Instructions:

IRS Form 720 can be accessed at http://www.irs.gov/pub/irs-pdf/f720.pdf which is an interactive document so that can be completed on line.

 

The PCORI fees are entered on line 133 for the appropriate plans. See pages 8 and 9 of the IRS Instructions for completing these fields. Instructions can be found at http://www.irs.gov/pub/irs-pdf/i720.pdf.

 

 

Complete the fields on page 7 and make your check or money order payable to “United States Treasury”.

Additional information on the PCORI fees can be found here:
Patient-Centered Outcomes Research Trust Fund Fee (IRC 4375, 4376 and 4377): Questions and Answers

• An IRS chart that shows which types of benefits the fee applies to:  Application of the Patient-Centered Outcomes Research Trust Fund Fee to Common Types of Health Coverage or Arrangements

IRS Form 720 Overview

IRS Form 720 instructions (see pages 8 to 9)

Please Note:
This information is provided for educational purposes only. It reflects the understanding of HRC Total Solutions and our partners using the available guidance as of the date shown and is subject to change. It is not intended to provide legal advice.  You should not act on this information without consulting legal counsel or tax advisors.  (June 4, 2015)


2015 Flexible Spending Account Limits Increased!

The IRS just recently announced that the 2015 employee election limit for medical Flexible Spending Accounts (FSA) will be $2,550.  This is a $50 increase from the 2014 limit. You can read the full IRS announcement here. This change applies to plan years starting on or after January 1, 2015.

Employers may chose to set their medical FSA election maximum to $2,550 for the 2015 plan year though not required by law.  Employers will need to amend their plan documents for 2015 no later than December 31, 2014 to indicate that $2,550 will be the new maximum election for their FSA plan offering.

Some important reminders regarding the $2,550 2015 FSA maximum:

  • The limit applies to employee salary reduction FSA contributions only. Employers may choose to contribute to an FSA in excess of the maximum.
  • The limit applies to the FSA plan year vs. calendar year.
  • The limit is on a “per account” basis. If a husband and wife both have access to an FSA through their respective employers, they could each contribute $2,550 in 2015, resulting in a household FSA contribution of $5,100.

Please contact your account management team if you have questions about making this change for your employees in the upcoming year.


FSA $500 Rollover: Frequently Asked Questions

Here are a list of some important questions pertaining to the recent IRS modification of the "use it or lose it" rule.  Please contact your Account Executive team for further guidance on this important change for Flexible Spending Account (FSA) plans.

Q: Can we have the 2 ½ month extension (Grace Period) and the $500 rollover?
A: No, employers will need to decide between those 2 options.


Q: Which is better for my employees; the 2 ½ month extension (Grace Period) or the $500 rollover?
A: If you have the 2 ½ month extension you have 2 ½ months to spend all the money left from  the previous year.  If you have the $500 rollover then you have all year to spend the rollover  amount. This will vary person to person as to which one is better for them.


Q: How do I know how much money my employees leave at the end of the year so I can decide if I want to have our company adopt the $500 rollover?
A: You can view an Account Balance report on the employer portal and see how much money  your employees have left at the end of the plan year to help guide your decision making.


Q: As an employer; will this mean there could be less money coming back to us at the end of the year because there were less funds forfeited?
A: Yes


Q: Can FSA plans that currently have a Grace Period be amended to allow the rollover provision instead?
A: Yes. If a plan has provided for a grace period and is being amended to add a rollover provision, the plan must also be amended to eliminate the grace period provision by no later  than the end of the plan year from which amounts may be carried over. The ability to eliminate a grace period provision previously adopted for the plan year in which the amendment is adopted may be subject to non-Code legal constraints.


Q: Will this increase participation in the FSA?
A: Most likely this will increase participation because employees will not be afraid of the "use it or lose it" rule.  This will mean a tax savings for your employees and you as the employer as well.

 

Q: Can Employers amend plan documents to allow this rollover feature?
A: Yes. Accordingly, an employer, at its option, is permitted to amend its § 125 cafeteria plan  document to provide for the rollover to the immediately following plan year of up to $500 of  any amount remaining unused as of the end of the plan year in a health FSA.


Q: Will HRCTS be updating our documents if we adopt the $500 rollover?
A: Yes, your documents will be updated if you do adopt the rollover.


Q: When will educational materials for our employees regarding the change be available? 
A: HRCTS has updated FSA enrollment materials available here for Employers who decided to adopt this feature. We have also provided you with an employer notice you can customize and send to your employees if you’d like to advise them of the change should you decide to adopt the rollover feature.


Q: Do you have some general information on the ruling you can provide to us?
A: Please refer to our notice regarding the IRS modification as well as our announcement regarding FSA enrollment.  You may also view the details of  the ruling in the Department of Treasury Notice 2013-71.


Q: Does this change affect the 90 day run out for the FSA?
A: No.


Q: Is this change for the healthcare and/or dependent care flexible spending accounts?
A: This is only for the healthcare FSA.


Q: Does the $500 rollover apply to the Limited Purpose FSA?
A: Yes.


Q: Can an employee rescind their rollover if they are signing up for a HSA and cannot have the FSA with the rollover in their new year if they are changing to a HSA upon their plan renewal?
A: Yes they can.  If they do not do that they cannot set up the HSA.


Q: Can employer contributions rollover to the new year or just employee contributions?
A: The guidance does reference that remaining unused amounts can carry over to the new year.  It does not specify employer or employee amounts.  However, the remaining available balance does include both employee and employer contributions.


Q: How do we notify you if we want to adopt this change?
A: Please email your Account Executive to let them know if you’d to adopt this for your plan.


Q: Do we need to do a new application for our plan if we make this change?
A: No.  Employers will not need to complete a new application for this change.


Q: When do we have to decide if we want to adopt this change?
A: A plan may be amended to adopt the carryover provision as long as the rollover provision is adopted prior to the end of the plan year ending in 2013 or 2014.


Q: Can we adopt this change now for our current plan year if we do not have the 2 ½ month extension?
A: Yes.


Q: Will you be notifying my employees of this change?
A: Employers would be responsible to communicate this change to their employees as well as provide the updated Summary Plan Description to participants once provided by HRCTS.


Q: Is there a fee associated with this change?
A: No, there are no additional fees.


Q: Will this change affect the accounting of our plans?
A: This is a question that we are still looking to clarify.  We are working with our software vendor currently as they are updating the system to accommodate the change.  Once we clarify how the rollover will be reflected in the system we will be able to provide more information as to how the rollover will show on reports and if it will affect the accounting of the plan if at all.


Q: Can an employee elect the full $2,500 election if they are rolling over funds to the new plan year?
A: Yes, the employee can elect the full $2,500 giving them a balance of up to $3,000 in the new  FSA plan year.


Q: Would rollover amounts be available day one of the new plan year or after the run-out period?
A: We believe the solution with our software vendor will allow the funds to be available day one of the new plan year. We believe that if there are claims coming in for the previous plan year during the run out that the system will look back to the old plan year to be able to pay the claim.


Q: Can the rollover amounts be given back to the participant as taxable income instead of rolling it over?
A: No, A § 125 cafeteria plan is not permitted to allow unused amounts relating to a health FSA  to be cashed out or converted to any other taxable or nontaxable benefit. Unused amounts  relating to a health FSA may be used only to pay or reimburse certain § 213(d) medical expenses  (excluding health insurance, long-term care services, or insurance.


Q: Can an Employer choose to only allow a lesser amount than $500 to be rolled over?
A: Yes, the Employer can elect to only allow an amount less than $500 to be rolled over to the  next plan year.


Q: If an employee elects the full $2,500 upon renewal and rolls over $500, would the full $3,000 be available once the rollover funds are rolled over?
A: Yes, the Uniform Coverage Rule still applies.


Q: Can an employee rollover the money to the next plan year if they do not elect a FSA account for the next plan year?
A: Yes, an employee can rollover up to $500 to the new plan year even if they’re not enrolling for any additional salary reductions in the new plan year.


IRS: Modification of “Use-It-or-Lose-It” Rule For Flexible Spending Arrangements (FSAs)

On October 31, 2013, the Department of Treasury issued notice Notice 2013 -71 along with a press release announcing a significant policy change affecting Flexible Spending Accounts (FSAs).  This policy modification contains a number of positive changes for FSA participants. The Department of Treasury has modified its FSA “use-it-or-lose-it” provision to allow a limited rollover of FSA funds.

What is changing?

  • Effective for plan years starting in 2014, employers will now have the option of allowing participants to roll over up to $500 of unused funds at the end of the plan year.
  • Effective immediately, employers that offer FSA programs that do not include a 2.5 month extension (grace period) will have the option of allowing participants to roll over up to $500 of unused funds at the end of the current 2013 plan year.

How will this benefit my participants?

  • This modification will help encourage FSA participation and significantly improve the overall experience of employees who already participate.
  • By enhancing healthcare options and offering greater protection of participant's annual elections.
  • This will also help to curb unnecessary spending by FSA participants seeking to avoid losing unused funds.

HRC Total Solutions will be providing additional information and educational materials for our broker partners, clients, and participants in the coming weeks.

 


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