In previous blogs here, here and here, I discussed generally the recently published proposed regulations on which taxpayers may rely regarding the new fee imposed under the Patient Protection and Affordable Care Act (PPACA) to fund the Patient-Centered Outcomes Research Trust Fund. The fee is considered an excise tax but is not reported on the Form 5330, the excise tax return relating to certain qualified plan excise taxes, nor on the Form 8928 which is used for reporting excise taxes relating to failures to meet COBRA and HIPAA requirements. Instead, this tax is reported and paid on a Form 720 Excise Tax Return. That excise tax return is typically due quarterly. However, the IRS has determined that insurance companies and plan sponsors need pay and report this fee only once a year. Regardless of policy year or plan year, the form is due July 31 with respect to all policies or plans that ended during the prior calendar year. Therefore, the first return would be due July 31, 2013 for policy years and plan years that ended between October 1, 2012 (when the fee becomes effective) and December 31, 2012.

For fully insured plans, the insurance company must pay the fee. For self-funded plans, the plan sponsor must pay the fee. In this regard, if a plan covers more than one employer, each employer must report and pay its own fees unless the plan states or designates a lead employer whose employees are covered under the plan as responsible for paying and reporting the entire fee. For these purposes, the normal controlled group rules that treat all related employers as a single employer do not apply. Therefore, if a parent company and its five subsidiaries are in a single health plan, the parent company and each of the five subsidiaries must file a separate Form 720 unless the plan designates one of the entities as the plan sponsor to make that filing. Employers with plans covering multiple entities will need to determine how they wish to meet this filing requirement and appropriately designate the entities for the filings.