Obamacare Alert: New Excise Tax on Employers Offering Self-Insured Health Plans

obamacareThere is a new excise tax required under the Affordable Care Act for employers who provide self-insured health plans (more commonly known as health reimbursement arrangements or medical reimbursement plans). For employers with a plan year ending between 10/1/12 and 12/31/12, filing and payment are due by 7/31/13.  Plans with fiscal years ending 1/31/13 through 9/30/13 do not need to file until 7/31/14.

The excise tax is relatively small and completion of Form 720 is very simple, so we encourage our clients to complete the submission themselves. Form 720 (Quarterly Federal Excise Tax Return) can be downloaded from the IRS website here.  Even though Form 720 typically requires quarterly filing, this medical reimbursement plan fee is remitted annually. If this fee is the only reason for filing Form 720 then only the second quarter form needs to be filed annually (due each July 31).

Form 720 is completed by entering the name and address of the employer at the upper portion of the first page. On page two, locate the line under Part II referred to as No. 133 (Applicable self-insured plans). The tax is assessed based on the number of lives participating in the plan for the prior plan year. For example, a corporation providing a medical reimbursement plan to an employee, the employee’s spouse, and two children has four lives participating. The tax due is only $1 for each participating person for the 2012 plan year, or $4 in this example. Next year, the fee rises to $2 per participant.  If you are only filing to report zero tax and you will not owe excise tax in future quarters, check the final return box above Part I of Form 720.

Once completed, sign the form at the bottom of page 2, and you can send those first two pages along with your check to:

Internal Revenue Service Center
Cincinnati, OH 45999-0009

Always be sure to make a copy for your records before mailing.

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

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

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