DAC Compliance Alert – IRS Releases Revised Form 720 (PCOR Fees)

June 7, 2013 – Diversified Administration Corporation – Compliance Alert IRS Releases Revised Form 720

IRS Released Revised Form 720
By David Follansbee

On June 3rd, the IRS released an updated version Form 720 which includes a section for the payment of annual PCOR Fees.

Background on the PCOR Fees:
Health care reform created a new nonprofit corporation, the Patient-Centered Outcomes Research Institute, to support clinical effectiveness research.This entity will be funded in part by fees (sometimes referred to as “PCOR fees” or “CER fees”) paid by certain health insurers and applicable sponsors of self-insured health plans and it will assist patients, clinicians, purchasers, and policymakers in making informed health decisions by advancing the quality and relevance of evidence-based medicine through the synthesis and dissemination of comparative clinical effectiveness research findings.

PCOR Fees are due July 31st of the year following the end of each plan year, for a total of seven (7) plan years. For Plan years ending prior to October 1, 2013, the fee will be $1 times the number of covered lives (employee, spouses and children). For subsequent plan years, the fee will be $2 per covered person, adjusted for inflation. The fees are reported and paid as an Excise Tax on Quarterly Form 720 (which means the fees are not tax deductible).

Employers with Plan years beginning November 1, December 1 or January 1, must report and pay the first PCOR fee by July 31, 2013. Employers with plan years beginning February 1 through October 1 will be required to report and pay the first PCOR fee by July 31, 2014. Employer groups who were with Diversified all of 2012 and who are required to report and pay the PCOR fee by July 31, 2013, should already have received a report of average covered members that can be used to calculate the fees on Form 720.

Anyone needing help with completing Form 720 should contact Dave Follansbee by email: dfollansbee@diversifiedgb.comor by telephone at: (860) 295-6531.

140Form 720 Instructions & Forms:

Click here for Instructions for completing Form 720

Click here for the Quarterly Form 720 and 720V payment voucher

The PCOR fee can be located at the beginning of Part II (IRS No. 133) on Page 2 of Form 720.
•    Employers of self-insured plans (including stand-alone HRAs) should only complete the section for “Applicable Self-insured Plans”.
•    You will also need to complete and sign the bottom section of Page 2.
•    Although Form 720 is intended to be filed quarterly, the PCOR fee is due annually. The instructions indicate that the PCOR fee should not be filed for the 1st, 2nd or 4th quarter. Therefore, you will need to darken the “3rd quarter” box when completing 720-V payment voucher.

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