The Patient Protection and Affordable Care Act imposes a new fee on all health care providers. Providers include not only insurance companies but also sponsors of self-insured accident and health insurance plans, and some companies that offer health reimbursement arrangements (HRA) and/or flexible spending accounts (FSA). The initial fee for plan years ending on or after October 1, 2012 and before October 1, 2013 is $1 times the average number of lives covered under the plan. The fee will increase to $2 per person for the next plan year.
Most HRA sponsors are required to pay the tax, except for arrangements that only cover dental and vision benefits. FSAs are only covered by the law if the employer’s contribution exceeds the employee’s contribution and the employer offers health insurance coverage, whether through an insurance company or self-insured plan.
This fee is paid with the second quarter Form 720 excise tax return, which is due July 31st. If you are required to file Form 720 for other reasons, just include the fee on page two of the return for the quarter. If this is the only reason you are filing the return, you will not need to file the form for the 1st, 3rd, or 4th quarters. The fee is due July 31 of the calendar year following the last day of the policy year (plan year). Therefore, plan years ending October 31, November 30, or December 31, 2012 will be due July 31, 2013. Plans ending after December 31, 2012 will be due on July 31, 2014.
IRS regulations offer a number of different ways to count the number of lives covered by your plan such as the actual method, the snapshot method, and the Form 5500 method. There is also a difference in the methods for self-insured plans and HRAs and FSAs. Unfortunately, there is no de minimis exception for small employers.
For more information, please contact us.