2013 Update – Patient-Centered Outcomes Research Institute Fees (PCOR)
General Information about PCOR
The IRS has finalized the regulations regarding the Patient-Centered Outcomes Research Institute Fees, or PCOR fees. The final regulations became effective December 6, 2012.
Section 4375 of the regulations addresses fees for specified health insurance policies. Section 4376 of the regulations addresses fees for applicable self-insured health plans. Section 4376 will apply to Health Reimbursement Arrangements (HRAs), and Health Flexible Spending Accounts (health FSAs) that are not considered excepted benefits as defined in section 9832(c) of the code.
This information will focus on the regulations finalized in section 4376 as it applies to HRAs and selected health FSAs.
How to Determine if the PCOR Fees Apply to Your Plan
Since HRA plans are considered group health plans, they are required to pay the fee. If an HRA plan is offered in addition to another self-insured plan, the plans may be combined for the purpose of calculating and paying the fees. Participants in both plans may only be counted once. If there is a participant in the HRA plan who is not in the other self-insured plan or vice versa, they must still be counted when determining the fees.
If the HRA plan is offered in addition to a fully insured plan, the fee must be paid separately for each plan; the plans may not be combined for the purpose of calculating and paying the fees. The issuer of the fully insured policy is responsible for paying the fees for that policy.
The regulations also apply to health FSA’s, unless the health FSA is considered an excepted benefit. To determine if your health FSA is an excepted benefit, you may follow the chart below:
What to do if the Fees Apply to Your Plan
The fees apply to plan years ending on or after October 1, 2012 and before October 1, 2019. There are special rules in effect for calculating the fees for the first year the fee is in effect. According to the final regulations, plans ending on or after October 1, 2012 may use May 14, 2012 as the start date of the plan year (this is 30 days after the proposed regulations were published) when calculating the fees.
The fees are $1per participant for plan years ending before October 1, 2013 and $2 per participant for plan years ending on or before October 1, 2014. For plan years ending after October 1, 2014, the fee will be calculated based on “increases in the projected per capita amount of National Health Expenditure”.
Fees must be reported and paid no later than July 31 of the year following the last day of plan year.
There are several methods available for calculating the fees. The methods available are:
- The Actual Count Method – add the actual number of participants covered on each day during the plan year and divide the total by the number of days in the plan year. Upon request, myCafeteriaPlan can schedule reports to be automatically sent to your employer account to assist with calculating the fees.
- The Snapshot Method – add the actual number of participants covered on a specified date during each quarter of the plan year and divide the total by the number of dates used. Upon request, myCafeteriaPlan can schedule reports to be automatically sent to your employer account to assist with calculating the fees.
- The Form 5500 Method – this method would only be applicable for plans that file a Form 5500. The total number of participants on the Form 5500 filed at the beginning of the plan year and the total number of participants on the Form 5500 filed at the end of the plan year are added together and then divided by 2.
When calculating the fees, there are certain participants that must be included in the count.
- Government plans are not exempt unless they meet the definition of an exempt government plan
- Retiree-only plans must pay the fees
- Participants on COBRA must be counted when determining the fees
Certain participants may be excluded when calculating the fees:
- Participants with a principal place of abode outside the United States
- Plans set up specifically for participants who have a principal place of abode outside the United States (Self-Insured Expatriate Plans)
Once the fees have been calculated, they should be reported and paid using Form 720 (Quarterly Federal Excise Tax Return). Amended fees should be reported and paid using Form 720X (Amended Quarterly Federal Excise Tax Return). Instructions for completing the form and the form itself can be found on the IRS website at www.IRS.gov. The forms are in the process of being updated. Once the updated forms are available they will be posted on the IRS website.
Forms must be completed and filed by the plan sponsor. The regulations specifically state that Third Party Administrators (TPAs) may not complete the form and file on behalf of the plan sponsor.
While myCafeteriaPlan may not complete the filing on your behalf, we are here to assist with the process and provide any data you may need to meet this requirement.
For additional details, the overview of the regulations may be found in Federal Register/ Vol. 77, No 235/ Thursday, December 6, 2012/ Rules and Regulations 72721-72727 available at the link below: