United States: Calendar-Year Plans Should Use Updated IRS Form 720 And Related Instructions To File By July 31 Deadline

Last Updated: August 4 2013
Article by Andy R. Anderson and Steven D. Spencer

Under the Affordable Care Act (ACA), for plan years ending on or after October 1, 2012, plan sponsors of self-insured plans and insurers are subject to an annual fee per covered life—known as the PCOR Trust Fund Fee (PCORTF Fee or the Fee)—which will be used to fund the Patient-Centered Outcomes Research Institute (PCORI). For the first year, the Fee is $1 per covered life; it will increase to $2 per covered life for the second year and will increase each year thereafter based on a standard tied to the National Health Expenditure Accounts until it expires in 2019.

Paying the Fee

The Fee must be paid no later than July 31 of the calendar year immediately following the last day of the plan year to which the Fee applies. As such, for calendar-year plans, the Fee is first due on July 31, 2013 for the January 1, 2012 plan year. Plan sponsors will make this payment by filing a Form 720 "Quarterly Federal Excise Return" on an annual basis (not on a quarterly basis). Recently, the Form 720 was updated to accommodate the PCORTF Fee filing and payment in time for the July 31, 2013 deadline.

On the revised Form 720, an employer (plan sponsor) will report the average number of lives covered under the plan. To determine the average number of lives to be reported, an employer may use the actual count method, the snapshot count method, or the Form 5500 method.1 The tax will be paid with the return, and deposits are not required for this Fee. The revised Form 720 and related instructions are available here and here.

Background on Final Rule

The U.S. Department of the Treasury issued the final rule on the Fee on December 6, 2012. Notable modifications and/or clarifications under the final rule are summarized below.

Plans/Programs Subject to the Fee

The final rule clarifies that health coverage (self-insured or insured) plans are subject to the Fee, including retiree-only health plans and COBRA or similar continuation coverage under federal or state laws (unless otherwise excluded). However, employee assistance programs (EAPs), disease management programs, or wellness programs are not subject to the Fee if the program does not provide significant medical care or treatment benefits.

Guidance Regarding Counting of Lives

The final rule clarifies the following with regard to counting covered lives. In general, there are no provisions that allow the Fee to be allocated between plans or otherwise aggregated when an individual is covered by more than one health plan. For example, if an individual is covered by a fully insured major medical plan and a self-insured prescription drug plan, both plans will have to pay the Fee for the same covered individual. However, a group health plan that provides health coverage through insured and self-insured options may disregard the lives that are covered solely under the fully insured options when determining the number of covered lives under the self-insured plan. The expectation is that the insurer will pay the Fee for those covered solely under the fully insured option.

In addition, if the same plan sponsor (employer) provides multiple types of self-insured coverage (e.g., self-insured major medical and self-insured prescription drug) in the same plan year, these self-insured benefits may be treated as one self-insured plan. Therefore, the covered lives that participate in these benefits would only be counted once. Similarly, if the same plan sponsor (employer) sponsors a health reimbursement arrangement (HRA) and a self-insured health plan with the same plan year, those benefits may be treated as a single plan. Therefore, each individual who participates in both of those benefits would be counted as one covered life for the calculation of the Fee. However, a plan sponsor may not treat the HRA and a fully insured plan as a single plan for purposes of the Fee.

The final rule adds some flexibility for plans using the "snapshot count method" for counting lives. As noted in our previous LawFlash, under this method, the plan sponsor may sum the totals of covered lives on any one date in each quarter of the plan year. The method has been slightly revised, and, now, the date used for the second, third, and fourth quarters may be within three days of the corresponding date used in the first quarter.


1 For more information on these methods, see our June 6, 2012 LawFlash, "Internal Revenue Service Issues Guidance on New Research Fee," available here. The slight revisions to the snapshot count method are discussed below.

Copyright 2013. Morgan, Lewis & Bockius LLP. All Rights Reserved.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions