In order to finance the Patient-Centered Outcomes Research Institute (“PCORI”), which is a newly created private, non-profit corporation mandated by The Affordable Care ACT (“ACA”), the ACA has established the Patient Centered Outcomes Research Trust Fund. This Trust is funded by the PCORI and ultimately financed by issuers of specified fully-insured health plans, self-insured health plans, health reimbursement arrangements (“HRA’s”) and health care flexible spending accounts (“FSA’s”). This funding is achieved via a fee assessment and tax return filing obligation with respect to the above mentioned plans. This could affect you.

How to Stay In Compliance

With respect to fully-insured health plans, your insurance carrier is responsible and liable for the filing and payment of the fee. However, with respect to all of the other above-mentioned plans, the plan sponsor (i.e. your company) is responsible for the filing and payment of the fee. If you are using a third party administrator to handle your FSA or HRA, they may prepare the form for you as a convenience. However, some third party administrators have chosen not to provide this service. Therefore, it is important to check with your third party administrator in order to ensure that you are in compliance.

Fee Schedule & Due Date

The PCORI fee is effective for each plan year ending on or after October 1, 2012 and before October 1, 2019 as follows:

• For plans ending on or after October 1, 2012 and before October 1, 2013, the fee is equal to $1.00 per average number of covered lives (See methods below for determining covered lives).

• For plans ending on or after October 1, 2013 and before October 1, 2014, the fee is equal to $2.00 per average number of covered lives (See methods below for determining covered lives).

• For plans ending on or after October 1, 2014 and before October 1, 2019, the fee is equal to $2.00 per average number of covered lives, plus an increase determined by the Secretary of Health and Human Services (See methods below for determining covered lives).

Please note that the PCORI fee must be paid by July 31st of the year following the last day of the specified plan year, and needs to be reported on IRS Form 720 “Quarterly Excise Tax Return”.

Methods For Determining “Covered Lives”

There are three acceptable methods that a taxpayer can use to determine the number of “covered lives” which is used to determine the above mentioned fee:

• The Actual Count Method: Total number of covered lives each day of the plan year divided by the number of days in the plan year, multiplied by $1.00 or $2.00 depending on the plan’s ending date (See above fee schedule).

• The Snapshot (More Complicated) Method: Total number of covered lives covered on a date during the first, second, or third month of each quarter (or more dates in each quarter if an equal number of dates is used for each quarter) and dividing that total by the number of dates on which a count is made. Each date used for the second, third and fourth quarters must be within three days of the date in that quarter that corresponds to the date used for the first quarter, and all dates used must be within the same policy year. This result is then multiplied by $1.00 or $2.00 depending on the plan’s ending date (See above fee schedule).

• The Form 5500 Method: The number of covered lives on your Form 5500 for the plan year, multiplied by $1.00 or $2.00 depending on the plan’s ending date (See above fee schedule). This method may only be used if your Form 5500 filing date is before the date the PCORI fee is due.