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New IRS Form 720 – Quarterly Federal Excise Tax Return


June 2013

Self-insured health plans, as well as issuers of some health insurance policies, are required to report and pay the Patient-Centered Outcomes Research Institute (PCORI) fee by July 31, 2013. The PCORI fee, under tax code Section 4375 and 4376, was established by the Affordable Care Act to fund a nonprofit institute that will conduct comparative research on the benefits of medical treatments, services, procedures, and drugs. Last December, final regulations were issued regarding this fee by the Internal Revenue Service.

The PCORI Fee is reported and paid using IRS Form 720. The IRS recently issued a revised Form 720 including specific sections on which to report this fee. The Form 720 instructions provide that, generally, the fee is $1 times the average number of lives covered under the plan or policy for plan years ending before October 1, 2013. The instructions also detail different methods for calculating the fee. For example, for self-insured health plans, there are three alternative methods: actual count method, the snapshot method, and the Form 5500 method. However, for plan years beginning before July 11, 2012, and ending on or after October 1, 2012, plan sponsors may determine the average number of lives covered under the plan for the plan year using any reasonable method. The Form 720 can be found here and the instructions for the form can be found here

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