ACA Reporting

Section 6055 & 6056

The Affordable Care Act (ACA) created reporting requirements under Internal Revenue Code (Code) Sections 6055 and 6056. Under these rules, certain employers must provide information to the IRS about the health plan coverage they offer (or do not offer) to their employees.

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PCORI

The ACA imposes PCORI fees on health insurers and self-insured plan sponsors.
These fees are widely known as PCORI fees, although they may also be called PCOR fees or comparative effectiveness research (CER) fees.
The fee applies to policy or plan years ending on or after October 1, 2012, and before Oct. 1, 2019.

Overview of the PCORI Fee

The ACA created the Patient-Centered Outcomes Research Institute to help patients, clinicians, payers and the public make informed health decisions by advancing comparative effectiveness research. The Institute’s research is funded, in part, through fees paid by health insurance issuers and self-insured health plan sponsors. These fees are widely known as PCORI fees, although they may also be called PCOR fees or comparative effectiveness research (CER) fees.

The PCORI fees apply for plan years ending on or after Oct. 1, 2012, but do not apply for plan years ending on or after Oct. 1, 2019. For calendar year plans, the fees will be effective for the 2012 through 2018 plan years. Issuers and plan sponsors will be required to pay the PCORI fees annually on IRS Form 720 by July 31 of each year. It will generally cover plan years that end during the preceding calendar year. Thus, the deadline for filing Form 720 was July 31, 2017, for plan years ending in 2016. For plan years ending in 2017, PCORI fees are due by July 31, 2018.

Reporting the PCORI Fee on Form 720

Issuers and plan sponsors will file Form 720 annually to report and pay the PCORI fee, no later than July 31 of the calendar year following the policy or plan year to which the fee applies. The PCORI fee applies separately to “specified health insurance policies” and “applicable self-insured health plans,” and is based on the average number of lives covered under the plan or policy.

Using Part II, Number 133 of Form 720, issuers and plan sponsors will be required to report the average number of lives covered under the plan separately for specified health insurance policies and applicable self-insured health plans. That number is then multiplied by the applicable rate for that tax year, as follows:

$1 for plan years ending before Oct. 1, 2013 (that is, 2012 for calendar year plans).
$2 for plan years ending on or after Oct. 1, 2013, and before Oct. 1, 2014.
$2.08 for plan years ending on or after Oct. 1, 2014, and before Oct. 1, 2015 (see Notice 2014-56).
$2.17 for plan years ending on or after Oct. 1, 2015, and before Oct. 1, 2016 (see Notice 2015-60).
$2.26 for plan years ending on or after Oct. 1, 2016, and before Oct. 1, 2017 (see Notice 2016-64).
$2.39 for plan years ending on or after Oct. 1, 2017, and before Oct. 1, 2018 (see Notice 2017-61).
For plan years ending on or after Oct. 1, 2018, and before Oct. 1, 2019, the rate will increase for inflation.

The fees for specified health insurance policies and applicable self-insured health plans are then combined to equal the total tax owed.

Issuers or plan sponsors that file Form 720 only to report the PCORI fee will not need to file Form 720 for the first, third or fourth quarter of the year. Issuers or plan sponsors that file Form 720 to report quarterly excise tax liability for the first, third or fourth quarter of the year (for example, to report the foreign insurance tax) should not make an entry on the line for the PCORI tax on those filings.

Corrections and Amendments

The final regulations did not explicitly address whether plan sponsors may correct or amend a previously filed Form 720 if certain errors are made (for example, miscalculations related to covered lives or fee amounts due). However, they did note that the penalties related to late filing of Form 720 or late payment of the fee may be waived or abated if the issuer or plan sponsor has reasonable cause and the failure was not due to willful neglect.

In addition, plan sponsors may use Form 720X, “Amended Quarterly Federal Excise Tax Return,” to adjust liabilities reported on a previously filed Form 720, including adjustments that result in an overpayment. Form 720X and the accompanying instructions do not specifically identify or refer to the PCORI fees. However, there is space to include an explanation of adjustments, which plan sponsors can use to identify the PCORI fee.

Reporting and Paying the Fee

Links and Resources

W-2 Reporting

The health care reform law requires employers to report the total cost of employer-sponsored group health plan coverage on their employees’ Forms W-2. The purpose of this reporting requirement is to provide information to employees regarding how much their health coverage costs. It does not mean that the cost of the coverage is taxable.

What Information Must Be Reported?

Employers must report the total cost of certain types of employer-sponsored health coverage. In general, this means coverage under group health plans.

It does not matter whether the employer or the employee pays for the coverage—it is the total cost of the coverage that must be reported. This means both the employer- and employee-paid portions.

Some coverage types do not need to be reported on Forms W-2. These include employee contributions to a health flexible spending account (health FSA), non-integrated dental or vision plans, health reimbursement arrangements (HRAs), multiemployer plan coverage, long-term care coverage and excepted benefits like liability insurance.

The new reporting requirement does not apply to amounts contributed to an Archer medical savings account (Archer MSA) or amounts contributed to a health savings account (HSA). Those amounts are already required to be separately accounted for on Forms W-2.

Do All Employers Have To Report This Information?

In general, all employers that provide “applicable employer-sponsored coverage” must comply with the Form W-2 reporting requirement. This includes government entities, churches and religious organizations, but does not include Indian tribal governments or tribally chartered corporations wholly owned by an Indian tribal government.

The Form W-2 reporting requirement is currently optional for small employers (those that had to file fewer than 250 Forms W-2 for the prior calendar year). Thus, if an employer is required to file fewer than 250 Forms W-2 for 2014, the employer would not be subject to the reporting requirement for 2015. Small employers will continue to be exempt from the reporting requirement, unless and until the IRS issues further guidance. The IRS confirmed that this transition relief for small employers applies for the 2015 tax year and will continue to apply to future calendar years until the IRS publishes additional guidance. Large employers (those that file 250 or more Forms W-2) were required to comply with the reporting requirement starting in 2012.

The Internal Revenue Code’s aggregation rules do not apply in determining whether an employer filed fewer than 250 Forms W-2 for the prior year. Also, if an employer files fewer than 250 Forms W-2 only because it uses an agent to file them, the employer does not qualify for the small employer exemption.

Where Will the Information Be Reported?

Does This Rule Affect My Taxes?

No. The inclusion of health care coverage information on Forms W-2 does not change the rules for taxable income. It does not affect the tax exclusion for amounts paid for medical care or coverage. Those items are addressed in another portion of the tax law that is not affected by this change.

The IRS has specifically stated that the reporting is for informational purposes only, to show employees the value of their health care benefits so they can be better informed consumers.

Is There Anything I Need to Do?

ACA

ACA Reporting

Section 6055 & 6056

PCORI

W-2 Reporting

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