Client Tip for July 2019: HEALTH CARE EXCISE TAX
HEALTH CARE EXCISE TAX
Reminder — the Patient Protection and Affordable Care Act excise tax on all health care providers is due July 31. 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 fee applies to plans ending after September 30, 2012 and before October 1, 2019.
The fee that is due for this year is for plan years ending October 1, 2018 through October 1, 2019. Since the fee ends October 1, 2019, any plans whose year ends in October, November, or December, this will be the last year for the tax.
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 tax is paid with the 2nd quarter’s Form 720 Excise Tax Return. 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.
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, or the Form 5500 method. There is also a difference in the methods for self-insured plans, HRAs, and FSAs. Unfortunately, there is no de minimis exception for small employers.
For more information on how to calculate the number of lives covered or for any other questions concerning this tax, please call us in Chesterfield at 636-532-9525 or in Washington at 636-239-4785.
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