The PCORI fee, filing and payment is due by July 31, 2023.The employer accomplishes the filing using the second quarter Form 720, most recently revised as of June, 2023.Form 720 can be found here.
The PCORI fee is assessed on the average number of lives covered under the policy or plan. For policy and plan years ending between January 1, 2022, and September 30, 2022, the fee is $2.79 per covered life. For policy and plan years ending between October 1, 2022, and December 31, 2022, the fee is $3.00 per covered life.
As background, the PCORI fee is assessed on the average number of lives covered under the policy or plan. Virtually, all health plans, whether insured or self-funded are subject to the PCORI fees. With regard to reimbursement type plans, health reimbursement arrangements (HRA) and medical flexible spending account (FSA) plans are subject to these fees. However, FSA plans that qualify as HIPAA-excepted plans are not subject to these fees. As a reminder, an excepted FSA must:
- Only reimburse dental or vision expenses;
- Cover fewer than two participants who are active employees; or
- Meet the maximum benefit test. What this means is that the maximum benefit available cannot exceed two times the salary reduction election; or the salary reduction election plus $500, whichever is greater.
In addition, the health FSA must meet an availability test. What this means is that the participants in the health FSA must also be eligible for a health plan that is subject to HIPAA (comprehensive health plan).
The PCORI fees are assessed on the insurer of an insured plan. For a self-funded plan, the plan sponsor is required to pay the fee on behalf of its plan. Because the law provides that the PCORI fees are to be paid by the plan sponsor, at least for plans subject to ERISA, the fees cannot be paid from plan assets.
Additional information about the PCORI fee is available on the IRS’ dedicated PCORI webpage and Questions and Answers webpage.
Employers subject to the ACA’s employer shared responsibility mandate (employing 50 or more full- time and full-time equivalent employees) who fail to offer minimum essential coverage to their full-time employees or fail to offer adequate and affordable coverage may be subject to an excise tax, if at least one of its employees qualifies for premium assistance through a marketplace.
If an employer does not know an individual’s household earnings, it can use one of three safe harbors for purposes of determining affordability. The IRS has yet to announce the 2024 threshold amounts. In the meantime, please note the 2023 rates:
- A Form W-2 determination in which the employer’s lowest cost self-only coverage providing minimum value does not exceed 9.12% (for 2023; 9.61% in 2022), of the employee’s Form W-2 wages (Box 1) for the calendar year.
- A rate of pay method in which the minimum value cannot exceed 9.12% (for 2023; 9.61% in 2022), of an amount equal to 130 hours, multiplied by the employee’s hourly rate of pay as of the first day of the coverage period. For salaried employees, the monthly salary is used instead of the 130-hour standard. An employer can apply this method to hourly employees if they experience a reduction in pay during the year; however, this methodology cannot be used for commissioned salespeople or tipped employees.
- A Federal poverty line (FPL) standard. See federal poverty level (FPL) guidelines for 2023.
For 2024, the ‘no coverage’ excise tax pursuant to Code Section 4980H(a) is $2,970 annualized (or $247.50 per month) and the ‘inadequate or unaffordable’ excise tax pursuant to Code Section 4980H(b) is $4,460 annualized (or $371.67 per month).
The ACA imposes certain cost-sharing restrictions, such as out-of-pocket limits on health plans. These annual out of pocket limits apply to insured plans offered through the marketplace, and insured and self-funded plans offered outside marketplace, excluding grandfathered plans. Below are cost sharing limitations for 2023 and 2024:
Note: no individual can be subject to an out-of-pocket limit greater than the single limit.
As a reminder, the out-of-pocket limits applicable to high deductible health plans (HDHP) used in conjunction with health savings accounts (HSA) differ from these ACA-imposed cost sharing limits. Below are the OOP limits for HDHP plans for 2023 and 2024:
- Catch-up contributions for people over 55 remain unchanged at $1,000.
- The contribution limit applies to the 2024 calendar year.
- The HDHP deductible and out-of-pocket limits apply to plan years beginning in 2024.
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| | About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Kansas City office.
The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein. | |