The IRS[1] has increased the amount of the annual PCORI[2] fee you may be required to pay as part of your ACA[3] compliance. This fee is due Aug. 1, 2022. For plan years that ended on or after Oct. 1, 2021, and before Oct. 1, 2022 (including calendar year plans), the fee is $2.79 per person covered by the plan. For plan years that ended on or after Oct. 1, 2020, and before Oct. 1, 2021, the fee is $2.66 per person.
The fee generally applies to specified health insurance policies such as major medical plans, but it does not apply to HIPAA[4] excepted benefits. If you sponsor a self-funded health plan, you or your administrator are required to file Tax Form 720 (available at www.IRS.gov) and make any payment due directly to the IRS. If you offer fully insured plans, your insurer will complete the filing but may bill you the annual fee.
We have received many questions in the past about PCORI fees as they relate to HRAs[5] and health FSAs[6]. If the account qualifies as a HIPAA excepted benefit, then no PCORI fee is due for that particular account.
How do I know if a health FSA is HIPAA excepted?
The FSA must meet all of the following to qualify as an excepted benefit:
- Employees offered the health FSA are also eligible to participate in major medical coverage
- Employer contributions to the employee’s health FSA may not exceed $500, or must be structured as a compliant dollar-for-dollar employer matching contribution.
When employers offer flex credits under a Section 125 plan, things become more complicated. As a general rule of thumb, the health FSA will remain HIPAA excepted so long as 50% or more of the flex credit amount is available as a cash out option, or noncashable flex credits are limited to $500 per plan year.
What about HRAs?
An HRA that may be used to pay deductibles and copays under the applicable self-insured health plan is not subject to a separate fee (and the fee will apply only to the applicable self-insured health plan) if both the HRA and the applicable self-insured health plan have the same plan sponsor and the same plan year.
If funds from the HRA can be used to pay other medical related fees and/or premiums not associated with the self-insured plan, then the HRA itself is generally subject to the PCORI fee.
This information provided by American Fidelity Administrative Services is intended to be educational. It is general in nature and should not be considered financial, legal or tax advice. Consult an attorney or a tax professional regarding your specific situation.
[1] Internal Revenue Service [2] Patient Centered Outcomes Research Institute [3] Patient Protection and Affordable Care Act [4] Health Insurance Portability and Accountability Act of 1996 [5] Health Reimbursement Arrangement [6] Flexible Spending Account
