Section 4376 of the Internal Revenue Code, as added by the Patient Protection and Affordable Care Act, imposes a temporary annual fee on a plan sponsor of an applicable self-insured health plan (including certain health reimbursement arrangement, or HRA, plans) for each plan year ending on or after October 1, 2012, and before October 1, 2019. On April 17th, 2011, the federal government issued interim final regulations that outline how this fee applies to HRA plans.
Background on the HRA Research Fee
The Affordable Care Act includes a "research fee" HRA plan sponsors must pay on an annual basis. The fee is technically referred to as the Comparative Effectiveness Research (CER) fee. According to the bill, this fee will be used to fund governmental research -- ACA created the "Patient-Centered Outcomes Research Institute" to evaluate the relative effectiveness of various medical treatments and procedures.
Recently, the IRS issued proposed regulations on the comparative effectiveness research fees required by the Affordable Care Act (ACA). Certain HRA Plans are subject to the proposed research fee rules.
The IRS has determined an HRA falls under the "self-insured health plans" definition, since HRAs are technically Section 105 ERISA health plans funded by employers. At present, the fee is scheduled to become effective for plan years ending on or after October 1, 2012.
How the Temporary HRA Research Fee Works
According to the proposed rules, the types of HRA plans that must pay the fees are HRAs that are not integrated with another applicable self-funded medical plan with the same plan year.
The research fees go into effect for plan years ending on or after October 1, 2012 and before October 1, 2019. The fees are due on July 31 of the calendar year immediately following the last day of the plan year to which the fee applies. The fee will be adjusted each year, as follows:
- Plan years ending October 1, 2012 – September 30, 2013: $1 multiplied by the average number of lives
- Plan years ending October 1, 2013 – September 30, 2014: $2 multiplied by the average number of lives
- Plan years ending October 1, 2014 and beyond: to be determined based on increases in the projected per capita amount of National Health Expenditures
For HRAs that must comply, there is a special rule that you would only count one covered life for each employee. Thus, a family of four covered by an HRA would result in only a $1.00 fee ($1.00 x the employee-participant only).
Example: A 10 Employee HRA would Pay a $10 Annual Fee for a plan ending between October 1, 2012 – September 30, 2013
Employers Must File Form 720 Annually to Report and Pay the Fees
HRA plans will only be required to report and pay fees annually via Form 720, due by July 31 each year. A good HRA Administrator will provide the plan sponsors with reporting to assist with participant counts.
It is important to note these are "proposed" regulations only, which means the IRS will be taking public comments before they become final. Written or electronic comments must be received by July 16, 2012.
More Information on the HRA Comparative Research Fee and Form 720
