If you have a health reimbursement arrangement plan (HRA, sometimes called a “Section 105 plan”), you probably owe a “Patient-Centered Outcomes Trust Fund Fee.”
Most people reading this blog post are probably saying, “What the heck is that?”.
The Patient-Centered Outcomes Trust Fund Fee is part of the Affordable Care Act. The fee is imposed on businesses or insurance companies at a rate of $1 per participant in a health plan. A “health plan” of course includes traditional health insurance plans, but it also includes HRAs.
(Side note: on an employer-provided health insurance policy [not an HRA], whether the employer or the insurance company owes the fee depends on the nature of the plan; I am not an expert on health insurance plans so I won’t get into that here.)
Back to HRAs: for purposes of this fee, an HRA is considered a health plan, thus making HRAs subject to the fee.
Here’s what’s annoying for businesses with an HRA: there’s no exemption for small businesses — and almost all HRAs (at least that I deal with) are with small businesses, oftentimes sole proprietors who have hired their spouse.
So you have a sole proprietorship. You hired your spouse and you set up an HRA because of the tax advantages (self-employment tax savings) of running medical expenses through the HRA as deductible business expenses via your spouse. Before July 31, you’ll need to fill out a Form 720 and send a $1 check to the U.S. Treasury ($1 x the number of participants in the HRA).
This is insane, of course. An abject waste of a small business’s time. But it’s what the Affordable Care Act calls for.
Certainly a $1 or $2 fee is no reason to eliminate your HRA. But it’s yet another piece of paperwork to keep track of and another form to fill out.