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The Wagner Law Group Description 

The Wagner Law Group, A Professional Corporation, is a nationally recognized ERISA & employee benefits, estate planning, employment, labor & human resources practice. 


Established in 1996, The Wagner Law Group has 22 attorneys engaged exclusively in employee benefits, estate planning and employment law. Five of our attorneys are AV rated by Martindale-Hubbell as having very high to preeminent legal abilities and ethical standards. The firm is among the largest ERISA boutiques in the country. Our practice is national in scope, with clients in more than 40 states and several foreign countries.



Contact Info

The Wagner Law Group


Massachusetts Office 

Tel: (617) 357-5200 

Fax: (617) 357-5250 

99 Summer Street 

13th Floor

Boston, MA 02110

Florida Office 

Tel: (561) 293-3590
Fax: (561) 293-3591
7121 Fairway Drive
Suite 203
Palm Beach Gardens, FL 33418


San Francisco Office

Tel: (415) 625-0002

Fax: (415) 829-4385

315 Montgomery Street

Suite 902

San Francisco, CA 94104





December 20, 2012 

 State and Federal Law Alert


IRS Releases Final Regulations on PPACA's Patient-Centered Outcomes Research Fees


The IRS has issued final regulations implementing certain fees imposed by the Patient Protection and Affordable Care Act ("PPACA") on health insurers and self-insured health plan sponsors. These fees, which are known as Patient-Centered Outcomes Research Institute ("PCORI") fees, are for funding medical research and comparing outcomes of various medical techniques. They apply for policy and plan years ending on or after October 1, 2012, and before October 1, 2019 (i.e., seven full policy or plan years).


The final regulations offer guidance explaining which health insurers, and which self-funded health plan sponsors, are subject to the PCORI fees and how to calculate the number of covered lives for purposes of determining the amount of the PCORI fee.


Definition of "Applicable Self-insured Health Plan"


The final regulations define self-insured health plans as all plans that are not fully insured. This includes any plan that provides accident and health coverage to an active employee, former employee or qualifying beneficiary under COBRA, or similar continuation coverage under federal or state law. The definition includes retiree-only health plans, which are exempt from many of the other PPACA mandates.


However, the definition excludes self-insured plans where substantially all of the coverage consists of HIPAA-excepted benefits (e.g., limited scope vision and dental). Employee assistance programs, disease management programs, and wellness programs that do not provide "significant benefits in the nature of medical care or treatment" are also excluded.




The final regulations include health reimbursement accounts (HRAs) as self-insured health plans. Nonetheless, multiple, self-insured arrangements maintained by the same plan sponsor can be treated as a single plan subject to only one PCORI fee. For example, an HRA will not be subject to a separate PCORI fee if it is paired with another self-insured group health plan that provides major medical coverage, if the HRA and the other plan are established by the same sponsor and have the same plan year. However, when an HRA is paired with an insured group health plan, each must pay the PCORI fee separately.




Under the final regulations, a health flexible spending account (FSA) is not covered if: (i) employees who are eligible for the health FSA are also eligible for group health plan coverage; and (ii) the FSA is funded either solely by employees' salary reduction contributions or the employer's contributions to the FSA do not exceed the greater of (a) $500, or (b) twice the employees' pre-tax contribution. In other words, the typical FSA will be exempt.


Calculating and Paying the Fee


For the first year, the PCORI fee is $1 for each covered life. For the second through seventh years, the amount increases to $2, subject to an adjustment based on increases to the projected per capita amount of the National Health Expenditures.


Plan sponsors of self-funded plans must remit the fee to IRS annually along with an IRS Form 720. The payment and form will be due July 31 for all plan years ending in the preceding calendar year.


Calculating the Number of Covered Lives


The final regulations provide that a plan sponsor may use any of the following methods to calculate the average number of covered lives under the plan: 

  • The actual count method (i.e., plan sponsor adds the totals of lives covered for each day of the year, divided by the total by the number of days in the plan year).
  • The snapshot method (i.e., plan sponsor adds the total lives covered on one date in each quarter of the plan year).
  • The Form 5500 method (i.e., plan sponsor uses a certain formula that includes the number of participants actually reported on the Form 5500 for the plan year). Note: The Form 5500 method is not available to sponsors that extend their filing deadlines beyond the July 31 due date for the PCORI fees.

The final regulations provide a special rule that allows sponsors of covered HRAs and health FSAs to count only employee-participants and exclude dependents.


The final regulations are effective immediately, and the first PCORI fees are to be reported and paid to the IRS by July 31, 2013.


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Pursuant to Internal Revenue Service Circular 230, we hereby inform you that any advice set forth herein with respect to US federal tax issues is not intended or written by The Wagner Law Group to be used and cannot be used, by you or any taxpayer, for the purpose of avoiding penalties that may be imposed on you or any other person under the Internal Revenue Code.


This Newsletter is provided for information purposes by The Wagner Law Group to clients and others who may be interested in the subject matter, and may not be relied upon as specific legal advice.  This material is not to be construed as legal advice or legal opinions on specific facts. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.