Certified Public Accountants
Richard B. Dawson, CPA 15 Casco Street
David E. Smith, CPA Portland, Maine 04101-2902
Eric A. Purvis, CPA/ABV, MST, CVA Tel (207) 874-0355
Joel H. Bassett, CPA/PFS, CMA, CIA Fax (207) 874-0865
Kirk J. Purvis, CPA, CFE www.dspbcpa.com
William H. Souter, CPA, MST
Craig M. Pike, CPA
Adam P. Johnson, CPA
Patricia S. Hodgdon, CPA
Jeremy S. Handlon, CPA
Kevin M. Brunelle, CPA, CVA
Michael P. Kelly, CPA
Karla J. Brannen, CPA
May 16, 2013
Dear Clients and Other Friends:
As many of you know, the Patient Protection and Affordable Care Act (PPACA), signed into law in 2010, provides for a sweeping overhaul of the health care system. The PPACA provides for a tax on issuers of certain health insurance policies and plan sponsors of certain self-insured health plans to fund the Patient-Centered Outcomes Research Trust Fund. While this tax mostly applies to health insurance companies or large, self-insured employers, companies who provide a Health Reimbursement Arrangement (HRA) or certain Flexible Spending Arrangements (FSA) may be affected. Health Savings Accounts (HSA) are not directly impacted.
The IRS released final regulations on the implementation of these provisions in December 2012. In these regulations, the Service held that HRAs and certain FSAs are self-insured health plans, even if offered in conjunction with a fully insured plan. As such, if you offer an HRA or FSA, you may be liable for this tax. All HRAs are required to pay the tax, and FSAs where employer contributions exceed employee deferrals are required to pay the tax.
For HRA or FSA plan years ending on or after October 1, 2012 through October 1, 2013, the tax is $1 per participant. This rate doubles next year and increases by a statutory formula through plan years ending before October 1, 2019, when these provisions are supposed to sunset. The tax is reported on Form 720 and is due July 31, 2013 for calendar year 2012 plans. The IRS has not yet updated Form 720 to report this tax but has stated it will update the Form prior to the July 31st due date.
Your HRA or FSA plan administrator may be preparing Form 720 for you. If not, they should provide you the information needed to complete the filing.
We welcome your questions and stand ready to assist in any way we can. If you have an HRA or FSA subject to the tax and need us to file Form 720, please let us know as soon as possible.
IRS Circular 230 requires us to inform you that any statements contained herein are not intended or written to be used, and cannot be used, by you or any other taxpayer, for the purpose of avoiding any penalties that may be imposed by federal tax law.
Very truly yours,