Updated IRS Form 720 for PPACA Fee Payment Purposes
The Patient Protection and Affordable Care Act imposes a new Patient-Centered Outcomes Research Institute (PCORI) fee, formerly the comparative effectiveness research fee, on plan sponsors and issuers of individual and group policies. The first year of the fee is $1 per covered life per year, the second year the fee adjusts to $2 per covered life and then it's indexed to national health expenditures thereafter until it ends in 2019.
Who pays the fee?
Under the IRS final rule, issuers and plan sponsors are responsible for paying the fee, which is treated like an excise tax by the IRS. A federal excise tax return (Form 720) reporting liability for the fee must be filed by July 31 of the calendar year immediately following the last day of the plan year..
As the issuer of specified health insurance policies, health insurance carriers are responsible for filing Form 720 and paying the required PCORI fee in the case of fully insured coverage. The nominal PCORI fee will be rolled into the premium. As the plan sponsor, self-funded customers must complete Form 720 and pay the fee directly to the IRS. (Self-funded customers with questions about the filing of excise tax returns should consult with their tax advisor.)
What has been updated?
This update was released on June 5, 2013. With health plans or policies facing a July 31 due date to pay the first patient-centered outcomes research fees, the IRS has issued a revised Form 720 and instructions.
Filers will enter covered lives subject to the $1 fee for the 2012 plan or policy year in Part II of Form 720 (line 133) to calculate the amount owed. Though Form 720 is used for quarterly excise taxes, filers should only complete line 133 when remitting the annual fee due July 31. Under the Affordable Care Act, the new fee applies to each plan or policy year that ends on or after Oct. 1, 2012, and before Oct. 1, 2019.
Where can I view the updated forms?
- CLICK HERE for full text of Form 720 (IRS, 3 Jun 2013)
- CLICK HERE for full text of Form 720 instructions for Part II, Line 133 (IRS, 3 Jun 2013)
- CLICK HERE for IRS Form 720, instructions, and related materials
We will continue to keep you informed and up to date on changes to this legislation. Please feel free to contact us at any time should you have questions or concerns.