Health & Welfare Notes
Vol. 18, Issue 2 May/June 2013
PCORI Fee Due by July 31, 2013 for plan years (self-insured health plans) and policy years (insured health plans) ending on or after October 1, 2012 through December 31, 2012. Plan sponsors are required to pay the fee for self-insured plans. Health insurance issuers are responsible for paying the fee for insured plans. As we reported in the January/February 2013 edition of Health and Welfare Notes, the “PCORI fee” or the “Section 4376 fee” is intended to partially fund the Patient‑Centered Outcomes Research Institute founded as a result of the Affordable Care Act. The PCORI fee is applicable to plan years ending on or after October 1, 2012, and extends through plan years ending before October 1, 2019. The fee must be paid no later than July 31 of the calendar year immediately following the last day of such plan year. Therefore, the first round of PCORI fees are due for 2012 calendar year self‑insured plans and certain fiscal year plans by July 31, 2013.
In general, self‑insured health plans that must pay the fee include medical plans, prescription drug plans, dental or vision plans (if provided without a separate coverage election and employee contributions), and retiree‑only health plans. Health reimbursement arrangements (HRAs), including premium‑only HRAs, and health flexible spending arrangements are also included unless these arrangements satisfy the requirements that allow them to be treated as excepted benefits. Plans not subject to the fee include plans that provide benefits which are HIPAA-excepted benefits including limited-scope dental and vision plans, onsite medical clinics, accident-only or disability‑only plans, and most flexible spending accounts (FSAs). It also does not include an employee assistance program (EAP), disease management program, or wellness program if the program does not provide significant benefits in the nature of medical care or treatment.
The PCORI fee for the first year (for plan years ending on or after October 1, 2012, and before October 1, 2013) is equal to $1.00 multiplied by the average number of covered lives in the group health plan. The PCORI fee for the second year will increase to $2.00 times the average number of covered lives in the group health plan and is indexed for increases in national health expenditures for the following years. Covered lives includes all covered participants and dependents, including those on COBRA and retirees. The IRS allows several different methods for determining the average number of covered lives. You can read more about it at http://www.irs.gov/irb/2012‑52_IRB/ar11.html#d0e1733.
On June 3, 2013, the Internal Revenue Service (IRS) posted an updated Form 720 (Quarterly Federal Excise Tax Return) and accompanying instructions on its website. The link to the Revised Form 720 and Instructions is www.irs.gov/uac/Form‑720,‑Quarterly‑Federal‑Excise‑Tax‑Return. The new Form 720 (with a revision date of April 2013), along with related payment voucher Form 720‑V, should be used to report and remit the “PCORI fee” to the IRS (see Part II, lines marked “IRS No. 133″ on the second page of the Form). Although the Form 720 is designed for quarterly payments of certain excise taxes, the PCORI fee is paid only annually. The instructions also note that deposits are not required for PCORI fees (that is, the fees are paid when the Form 720 is filed), so plan sponsors are not required to use the IRS’s electronic tax payment service to pay these fees. Plan sponsors of self‑insured health plans must act soon to make arrangements to complete and file the Form and pay the annual PCORI fees to the IRS, as the PCORI regulations directly prohibit using “third‑party reporting” arrangements with respect to the Form 720.
On June 7, 2013, the Office of the Chief Counsel of the IRS released a memorandum concluding that, in general, the payment of the PCORI fee should be tax deductible as an ordinary business expense.
Multiemployer Health and Welfare Plans May Pay PCORI Fees from Plan Assets. On January 24, the Employee Benefits Security Administration (EBSA) released “FAQs about Affordable Care Act Implementation Part XI.” Question and Answer number 8 states that payment of the ACA Patient‑Centered Outcomes Research Institute (PCORI) fees may be made from plan assets, and will not be considered a prohibited transaction under ERISA.
HHS Launches Health Insurance Marketplace Educational Tools. The Department of Health and Human Services (HHS) announced the re‑launching of a new, consumer‑focused HealthCare.gov website and a 24‑hours‑a‑day consumer call center to help Americans prepare for open enrollment on the Health Insurance Marketplace, and ultimately sign up for private health insurance. The new tools will help Americans understand their choices and select the coverage that best suits their needs when open enrollment in the new Health Insurance Marketplace begins October 1. For Spanish speaking consumers, CuidadoDeSalud.gov will also be updated to match HealthCare.gov’s new consumer focus. In addition to English and Spanish, the call center provides assistance in more than 150 languages through an interpretation and translation service. Customer service representatives are available for assistance via a toll‑free number at 1‑800‑318‑2596 and hearing impaired callers using TTY/TDD technology can dial 1‑855‑889‑4325 for assistance.
Employers Must Provide Notice of Health Insurance Exchange to Employees by October 1, 2013. The U.S. Department of Labor (DOL) issued Technical Release 2013‑02 on May 8, 2013, providing temporary guidance and model notices that will allow employers to comply with another new requirement imposed by the Affordable Care Act (ACA). Originally, the ACA required employers to provide employees with a “Notice of Exchanges” by March 1, 2013. However, that deadline was postponed, pending coordination by the regulatory agencies charged with ACA enforcement. The DOL has now announced a new October 1, 2013 compliance deadline, along with model notices for employers to use pending further guidance.
The ACA requires employers to provide all employees with a written notice containing information about the new insurance purchasing exchanges, now called the “Health Insurance Marketplace” or simply “the Marketplace.” This notice must (I) include information regarding the existence of the Marketplace, as well as contact information and a description of the services offered on the Marketplace; (ii) inform the employee that the employee may be eligible for a premium tax credit if the employee purchases a qualified health plan through the Marketplace; and (iii) contain a statement informing the employee that, if the employee purchases a qualified health plan on the Marketplace, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for federal income tax purposes.
Employers are required to give the notice to current employees who are employed prior to October 1, 2013, by October 1, 2013. For employees hired on and after October 1, 2013, employers must provide the notice within 14 days of the employee’s date of hire. The notice may be provided via first‑class mail or electronically if the employer’s electronic distribution procedure is consistent with the DOL safe harbor requirements for electronic distributions.
This new notice requirement applies to all employers that are subject to the Fair Labor Standards Act (FLSA). Generally, this includes employers that employ at least one employee and that engage in interstate commerce. Note that this is not the same definition of employer that is used for other purposes under the ACA and this notice requirement will apply to most employers. In addition, employers are obligated to provide the notice to all employees, regardless of whether the employer provides health coverage and regardless of whether the employee has full‑time status, part‑time status, and/or is eligible for health coverage.
The DOL issued two model notices—one for employers that offer health plan coverage to employees and one for employers that do not. The model notice includes questions that must be tailored to the employer’s plan, as well as optional provisions specific to each employee that the employer may choose not to include. Employers may use one of these models, as applicable, or a modified version, provided the notice meets the content requirements described above.
Finally, the Technical Release also includes a link to an updated model COBRA election notice for group health plans. This notice has been updated, among other things, to include information about health coverage available through the exchanges/Marketplace and to reflect changes in preexisting condition exclusion rules under new health care reform rules.
Technical Release 2013‑02 and the model notices are available on the DOL’s website www.dol.gov/ebsa/healthreform.
Disclaimer – This newsletter’s purpose is to inform our clients and friends of recent legislative health care-related developments. It is not intended, nor should it be used, as a substitute for specific legal advice.
Health and Welfare Notes is prepared four to six times annually and will accompany Retirement News. If there are questions concerning the information discussed, call richard Gabriel associates and ask for Gabe Zinni, Karen Irwin, Cindy Swartz or Nancy Cunningham.