Affordable Care Act Alert: PCORI Fee 720 Filing Requirement

KatzAbosch Affordable Care Act Alert: PCORI Fee 720 Filing Requirement
Employer filing requirement reminder – 7/31/2015
Form 720 / PCORI Fee

The Patient Protection and Affordable Care Act of 2010 (Affordable Care Act or ACA) created an excise tax related to the Patient-Centered Outcomes Research Institute (PCORI). Due to this, some employers are required to file a Form 720 Excise Tax return and pay a small fee on a “per-covered-life” basis. The Treasury department has also issued several positions relatively recently which should be reviewed by employers who sponsor Health Reimbursement Arrangements (HRAs).

When employers purchase fully ensured health insurance plans, their insurer should fulfill all filing and payment requirements. However, for employers with self-insured health plans, the filing and payment responsibilities fall on the employer. Examples of applicable self-insured health plans for the purpose of determining PCORI fee requirements include self-funded medical insurance plans, self-funded prescription plans and HRAs. Note: Most Health Flexible Spending Arrangements (FSAs) are not applicable self-insured plans because they are specifically exempted under the Internal Revenue Code (IRC).
Employers with applicable self-insured plans will need to file IRS Form 720 by July 31, 2015 and remit payment of a small fee. The fees per covered life depend on the applicable self-insured health plan’s year end, as follows:

  • For plan years ending between 1/1/2014 and 9/30/2014, the fee is $2 per covered life.
  • For plan years ending between 10/1/2014 and 12/31/2015, the fee is $2.08 per covered life.

For many applicable self-insured health plans, the above fee is due on each covered life (including employees’ spouses and/or dependents). However, for HRAs, the fee is due only on the employee covered by the plan. Employers should coordinate with their Third Party Administrator (TPA) or insurance broker to determine the number of covered lives for the purposes of filing IRS Form 720.

Employers who have had HRA plans in effect for several years should be sure to review recent IRS pronouncements (ex: Notice 2015-17 and Notice 2013-54) to ensure compliance with HRA coverage and payment requirements. Sponsorship of non-compliant HRA plans or employer payment plans may be deemed ineligible group health plans which do not comply with the ACA’s mandated market reforms. Penalties for such non-compliance can be $100 per day per employee (i.e. $36,500 per year per employee).

For more information or specific questions, please contact a KatzAbosch tax advisor at 410-828-CPAS (2727) or email

Submitted by James Eaton, CPA, MBA and KatzAbosch’s Tax Department Chair, Michael J. Agetstein, CPA, PFS.

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