New Excise Tax on Medical Reimbursement Plans due July 31, 2013
As part of the new Affordable Care Act, employers who provide a self-insured health plan (commonly referred to as medical reimbursement plans or health reimbursement arrangements) are potentially subject to a new excise tax in 2013. The tax is assessed based on the number of lives participating in the plan for the prior plan year. For example, a corporation providing a medical reimbursement plan to an employee, the employee’s spouse, and two children has four lives participating. The tax due is only $1 for each participating person for the 2012 plan year, or $4 in this example. Next year, the fee rises to $2 per participant. The tax is considered a plan fee so it is deductible.
This new excise tax requires a filing and a small payment, with the first submissions due by 7/31/13 for those with a plan year ending between 10/1/12 and 12/31/12. Accordingly, those with a calendar year self-insured health plan for 2012 are in the first round of filers. There was some speculation that this tax would be postponed until 2014 but the IRS recently updated the form used to report this tax (Form 720 – Quarterly Federal Excise Tax Return.) Even though Form 720 normally requires quarterly filing, this particular tax is remitted annually by filing the form for the second quarter of the year (i.e. – July 31)
Fiscal year self-insured plans are only subject to the 7/31/13 filing if their plan year ends on 10/31/12 or 11/30/12. Plans with fiscal years ending 1/31/13 through 9/30/13 will not file their first Form 720 until 7/31/14.
There is a small penalty for not timely filing and paying so adherence to the 7/31 deadline is recommended. The excise tax is very small, the completion of the Form 720 is simple, and can be downloaded from the IRS website. For those using 3rd party administrative services the recommendation is to follow up with those providers to ensure that the form will be filed by the 7/31/13 deadline.
Please contact AAF if you have any questions or need assistance in preparing this form.