New filing Requirement as Part of the Affordable Care Act - Form 720 due July 31st: An Article Authored by Norman LeBlanc, CPA from KLR - Accounting Firm Boston, Massachusetts, Providence, Rhode Island

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New filing Requirement as Part of the Affordable Care Act - Form 720 due July 31st

posted Jul 9, 2013 by Norman LeBlanc, CPA

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A lesser known element of the Affordable Care Act is the imposition of new fees and reporting requirements for certain health policies and plans.  While most of this falls on insurers, business owners need to be careful because if they are self insured or have a health reimbursement plan (HSA, FSA, HRA) for their employees, then they too fall under the new rules. 

This rule often applies to companies with high deductible health plans where the company covers the deductible.  Not all HSA, FSA, and HRA’s are subject to this fee but if general health care - other than vision or dental - is their primary benefit, then the fees apply.  **Please note, if there is more than one plan to which the fees apply, the plans can often be combined when calculating the amount owed, so only one fee is paid.

The first step of filling the Form 720 is to determine the due date.  This new fee is due for plan years that end on October 1, 2012 and later.  The form is then due July 31 of the year following the end of the plan year. 

For example, if your plan year ends in November 2012, your first form is due July 31, 2013.  If your plan year ends in January 2013, your first form is due July 31, 2014.  The fee for plan years ending before October 1, 2013 is $1 per person covered by the plan.  Keep in mind, this is only for those covered by a self insured plan or a health reimbursement account, not necessarily everyone on the company’s general health insurance plan.  The fee increases to $2 for plans ending between October 1, 2013 and October 1, 2014.

To calculate the fee, you are allowed to use the average number of people covered under the plan.  There are three general methods to do this:

  1. Actual count
  2. Snapshot
  3. Member months

The Actual Count method requires counting the covered members from May 14, 2012 to the end of the policy year—count the number of members on each day and divide by the number of days to arrive at the average.

The Snapshot method allows counting the number of covered members for each quarter from May 14, 2012 to the end of the policy year—count the number of members in each quarter and divide by the number of quarters.

The Member Months’ method is based on a calendar year and it involves counting the covered members at the end of each month and dividing the total by 12.  Since 2012 is the first plan year that the new fees apply, the total is then pro-rated for only the 4th quarter.

The average number of covered members is then entered on line 133 of the Form 720.  That number is multiplied by $1 for forms due July 31, 2013. 

Signed forms are then sent to: 
Internal Revenue Service
Cincinnati, OH 45999-0009

**Special note: All federal business tax payments must be made using the Electronic Federal Tax Payment System (EFTPS).  

These rules are new and the definitions are complex. If you have any questions or need additional guidance, please contact Norman LeBlanc, CPA or any member of the Tax Services team at 888-857-8557.

Read more on the Affordable Care Act, the latest updates and watch our recent webinar series in our Healthcare Overview