Tax Return Due July 31st for Employers with Self-Insured Plans, Including HRAs and Certain FSAs

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The Patient Protection and Affordable Care Act imposed a fee (excise tax) and return filing requirement on sponsors (employers) of self-insured accident and health plans, including companies that offer health reimbursement arrangements (HRAs) or certain flexible spending accounts (FSAs) for the benefit of their employees. This tax was instituted to fund the Patient-Centered Outcomes Research Institute (PCORI).

Specifically, the Internal Revenue Service held that HRAs and certain FSAs are self-insured health plans, even if offered in conjunction with a fully insured plan. FSAs can generally be exempt from the tax when other group health plan coverage that is not limited to excepted benefits (under IRC Section 9832) is made available by the employer, and the employer’s contribution cannot exceed the employee’s contribution (or, if greater, doesn’t exceed $500 plus the employee’s contribution).

Health savings accounts (HSAs) are not considered self-insured health plans and therefore are not subject to this excise tax. There are also exemptions for certain self-insured plans that provide excepted benefits, such as limited-scope dental or vision plans under a separate policy with separate coverage elections and premium charges.

Unfortunately, there is no de minimis exception for small employers.

The tax is paid with the second quarter Form 720 federal excise tax return which is due July 31st of the calendar year immediately following the last day of the policy/plan year. Thus, the tax return is due by July 31, 2015 for policy years ending on or after January 1, 2014 and before January 1, 2015. The current excise tax amount is approximately two dollars times the average number of lives covered under the plan.

If you have any questions concerning the impact on your company or would like assistance with filing the return, please contact us as soon as possible.